The USG did not obtain a new proposal. Our intent is to escalate the 3rd year pricing for the 2 year extension, as such we will not negotiate new hardware pricing, so we have nothing to evaluate. Can this be done without a proposal and contractor submitting certified cost and pricing data for the hardware delivery orders? A mutually agreed to escalation factor will be applied to the hardware prices to establish pricing for the additional period of performance. The escalation factor based on established indices for economic conditions will be analyze to ensure the factor will result in fair and reasonable hardware prices for FMS customers. Actual FMS order are unknown, but we did a full evaluation for the 3 years and want to escalate the 3rd year for the 4th and 5th year pricing. If the contractor initially submitted cost and pricing data for the 3 years, their certification to the rates that were used in generation the escalation and certification to the escalation factor is that sufficient for the requirements of current cost and pricing data?
Question Summary: you have an approximate $500M ceiling, 3-year, IDIQ for which you are extending another 2 years by increasing the ceiling an approximate $250M to cover both hardware and support services. It is a sole source acquisition for which certified cost and pricing data were obtained in awarding the original 3-year agreement. Although – “The contractor will still continue to submit a Certificate of Current Cost and Pricing Data for task orders awarded under the extension.” – you question whether you need to obtain certified cost and pricing data for the 2-year extension, because you have applied any number of price analysis techniques on the original 3-year agreement (e.g. escalating) to form the 2-year extension.
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Answer Summary: if current, accurate, and complete cost and pricing data are going to be submitted and certified on the task orders – and that certification is an unqualified certification, without relying upon any elements of cost/price from the basic or extended agreement (e.g. a rate schedule, or hardware pricing list), then the data and certificate submitted at the time of negotiating the task orders is sufficient. Indeed, not only a sufficient certification, but also the ONLY certification recommended - as long as the certification made at the time of placing the task orders is truly an unqualified certification not being affected/limited by any other terms and conditions being made by the IDIQ. Whether or not a certification is needed (or desired) when forming the IDIQ will depend upon the terms of the IDIQ as it may, or may not, require the task orders to be priced using certain elements (e.g. rate schedules or hardware price lists) as firm pricing, or not-to-exceed (NTE) ceilings. Considering the task order is THE contract for which government monies are obligated, the pattern of the FAR Certificate executed at the time of the task order is that ALL elements of pricing be current, complete and accurate at this time. IDIQ pricing elements expected to be used as firm pricing in the task order will likely result in a limited, qualified certification of the data at the time government monies are obligated in the task order. Whereas IDIQ pricing elements expressed as NTE ceilings will result in an unqualified certification as contemplated in the normal FAR Certificate.
Rationale: perhaps your IDIQ actually does contain elements such as rate and hardware price lists where it is expected that these elements should be incorporated in pricing the task order, and not necessarily updated to the time of negotiating the task order? If this is the case then a date “other than the date of agreement on price” of the task order, at least for certain elements of the pricing relying upon the rate/price schedules, is perhaps being used in the certifications submitted for the task order pricing. But such a situation would not meet the criteria for a cutoff date (FAR 15.406-2(c)) which needs to be as close as practicable (feasible) to the date of agreement on price (10 USC 2306a(e)(1)(B)).
Mention is also made to a Forward Pricing Rate Agreement (FPRA) which perhaps serves as a good analogy to relying upon a rate schedule which might have been included in the terms of the IDIQ. The FAR Certificate (FAR 15.406-2(a)) makes clear the certification of the specific pricing action includes any advance agreements and forward pricing rate agreements between the offeror and the Government. Paragraph (c) of FAR 15.407-3 -- Forward Pricing Rate Agreements further clarifies: “Contracting officers shall not require certification at the time of agreement for data supplied in support of FPRA’s or other advance agreements. When a forward pricing rate agreement or other advance agreement is used to price a contract action that requires a certificate, the certificate supporting that contract action shall cover the data supplied to support the FPRA or other advance agreement, and all other data supporting the action.” Notice again the FAR 15.407-3(c) admonition to NOT require certification at the time of agreement for data supplied in support of an FPRA, or other advance agreement(s). This would/will avoid any subsequent confusion that the contractor’s responsibility ends at the time the FPRA is formed. The contractor’s responsibility for the rates does not end with the formation of the FPRA, but extends to the pricing of individual contracts priced by using the FPRA, or other advanced agreements.
When it comes to extending a schedule of rates from an existing agreement to form an extended agreement, it would be folly to presume that all one needs to do is apply an escalation factor to cover whatever economic escalation, or cost of living that might be involved. Applying a cost of living adjustment to direct labor rates would not consider changes to the contractor’s average labor rates due to retirements leaving at the top of the pay scale being replaced by new employees are coming in at the bottom of the pay scale. With respect to indirect costs such as overhead and general & administrative rates – these are primarily affected by the estimated future business base used at the time they were originally developed/calculated. For reasons totally unrelated to cost of living, this business base estimate would/should likely look completely different in the current application than it did when originally developed. It is for this reason that FPRAs have a notoriously short life expectancy, definitely much shorter the than the 3-5 years being used in the IDIQ.
Given the statement that the contractor already has been providing, and will continue to provide, certification at the time of the negotiation of the task order - to obtain certification, or not, when forming the IDIQ agreement is NOT necessarily the issue. Whether or not the IDIQ agreement is stipulating a procedure to be used in pricing the task orders is more consequential in that it may result in certifications for those task orders that differ significantly with the standard FAR certification. Even if an original IDIQ had been competitive, and therefore considered exempt from certification because of adequate price competition certification at that time – given the variety (from support services to hardware), and methods (FFP, CPFF, and other CR) for ordering, would there still remain an expectation for certification at the time of negotiating the task orders?
Consider an individual task order for items ordering off a hardware price list that was subject to competitive evaluation when forming the IDIQ – would there be a need for certification at the time the task order was subsequently placed under the IDIQ? If this were a Multiple Award IDIQ contract where the task orders are also individually competed, would the competitors be limited by the terms of the IDIQ to having to just use the price list they submitted when forming the IDIQ agreement? Or would those original IDIQ prices be Not-To-Exceed (NTE) prices where competitors were free to compete with even lower prices on individual task orders? If the IDIQ terms were written as NTEs leaving room for competition at the time of the task order, then one would be hard pressed to claim certification were needed at the time of award of the task order. But which would have been the more significant competition – the one when forming the IDIQ agreement, or the one when placing the individual order? Most would say the later one. But note that situation arose because the original IDIQ agreement listed hardware prices as NTEs allowing room for competition to occur at the task order level. In your situation with a sole-source IDIQ you would similarly substitute “certification” for “competition” and would find that the more significant certification would occur at the time of placing the task order. But likewise note that if the terms of the IDIQ listed the hardware prices as FFP, rather than NTE, this would NOT be the case – the certification (substitution for competition) at the time of forming the IDIQ would now be THE imperative certification since the second certification (substitution for competition) at the time of placing the individual task order is basically meaningless.
With respect to ordering support services where the IDIQ might include FBLRs (fully burdened labor rates - direct labor rates plus all associated indirect cost rates) that are expected to be used when pricing and placing the individual task orders – it is possible that the second certification is needed to cover the pricing aspects not known at the time the IDIQ was formed, even if the FBLRs are expressed in terms of agreed-to fixed rates rather than NTE rates. For example, the hours required by skill category might not have been identified, or knowable, in advance of the scope of the task order being subsequently placed. Consequently, the view is that the contractor’s estimate of the hours needs to be current, complete, and accurate at the time of negotiating the task order and therefore must be certified. But if the terms of the IDIQ expressed the FBLRs as NTEs, the contractor’s certification required anyway to cover the estimated hours at the time of placing the order would also extend to ensure they were also using the most current, complete and accurate rates rather than the ones estimated 3-5 years prior. Otherwise, an IDIQ with terms expressing the FBLRs as firm rates that must be used in pricing the task orders will result in qualified certifications (expressed or implied) at the time of placing the task order that vary from the FAR Certificate.