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  • Question

    I conducted cost analysis and profit/fee analysis on the CPFF CLIN. All Offeror's proposed a fee rate in excess of 8%. The weighted guidelines recommended a fee rate of 5%. During cost realism, I adjusted all Offeror's fee rate to 5% which lowered the CPFF Total Evaluated Price (TEP). I was advised that I should not have adjusted the Fee because this is a competition. My question is - DFARS 215.404-4 requires the use of a structured approach in developing your negotiation objective on any negotiated action when cost or pricing data is required - so when does DFARS 215.404-4 not apply? and if weighted guidelines recommends a lower Fee - is the PCO required to negotiate to that rate (reasonableness) or can they just award at the 8% and ignore the weighted guideline recommended rate. I want to know if I AM required to adjust the Offeror's TEP in this situation or if I should not adjust the TEP. If I am not to adjust - then should I do a weighted guideline at all? What do the regulations say - what is required and what is not required.


    Answer

    With this being an ongoing competitive requirement, please keep in mind that this answer is strictly advisory in nature and you should consult with your Contracting Officer, program attorney, and follow the procedures outlines in your solicitation.
     
    Your question has several issues wrapped up in one and you might want to consult the following FAR/DFARs citations to explore the issues further. 
     
    FAR 15.305(a)(1) – There several important points contained in this paragraph including the general correlation between competition and price reasonableness and the requirement to perform a cost realism analysis (vice cost analysis) on cost-reimbursement CLINs – “Normally, competition establishes price reasonableness.”;  “When contracting on a cost-reimbursement basis, evaluations shall include a cost realism analysis to determine what the Government should realistically expect to pay for the proposed effort, the offeror’s understanding of the work, and the offeror’s ability to perform the contract.” 
     
    FAR 15.308 – Summarizes the importance of documenting the SSA’s decision considering the source selection methodology used and the “comparative assessment of proposals against all source selection criteria in the solicitation.”  
     
    FAR 15.402 and FAR 15.403 – Describes the Government’s pricing policy and requirements for either obtaining or not obtaining CERTIFIED cost or pricing data. Please note that FAR 15.403(c)(1) names Adequate Price Competition as an exception to obtaining certified data. (Also see FAR 15.403-3(b)) 
     
    FAR 15.404 – Explains the differences between cost and price analysis, when each is required and the role of competition in helping to make this determination. Also, see FAR 15.404-1(d) for a specific explanation of cost realism analysis, when it is required, its purpose and general methodology for completing it. 
     
    FAR 15.404-4 (Profit) – In reading this section, notice the specific references to the different types of analysis mentioned above (cost vs. price analysis) and competitive vs. non-competitive requirements. 
     
    DFARS 215.300 – Here you will find the link to the DoD Source Selection Procedures. Be sure to review them to see if they apply to your acquisition. 
     
    DFARS 215.404-4(c)(1) – “Also, do not perform a profit analysis when assessing cost realism in competitive acquisitions.”
     
    As mentioned previously, be sure to consult the cognizant personnel in charge of your acquisition and always follow the procedures outlined in your solicitation.


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