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    How do I evaluate Cost Realism in the source selection?


    Answer

    There appears to be a conflict with your proposed approach.  You state that you’ll be using a CPFF contract type and must, therefore, perform a cost realism evaluation.  I assume your reference for this requirement is FAR 15.305(a)(1) which states (in part) “…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. …”  However, you also indicate that you’ll be using either a LPTA or PPT methodology.  I’m assuming that since you are Air Force that your reference is Air Force Federal Acquisition Regulation Supplement (AFFARS) and specifically, AFFARS 5315.3 Source Selection.  Proposal evaluation is covered under AFFARS 5315.305 and offers both the LPTA and PPT methodologies for proposal evaluation.  However, IG5315.101-1, Performance Price Tradeoff (PPT), applies only to the following acquisitions (see paragraph 2.1):
     
    Replenishment spares
    Non-complex operational contracting acquisitions
    Some types of construction contracting
    Non-developmental, noncomplex service or supplies
    Service contracts with only pass/fail technical requirements
    Low technical complexity “build to print” contracts
     
    In addition, PPT is specifically not recommended for the following acquisitions (see paragraph 2.3):
     
    Sole source buys
    Sealed bidding
    Technically complex acquisitions
     
    You state that you anticipate using a CPFF contract type which under FAR 16.306(b)(1) requires that “A cost-plus-fixed-fee contract is suitable for use when the conditions of 16.301-2 are present and, for example --
    (i) The contract is for the performance of research or preliminary exploration or study, and the level of effort required is unknown; or
    (ii) The contract is for development and test, and using a cost-plus-incentive-fee contract is not practical.

    LPTA method of source selection would also be inappropriate to use since this method would require a definitive conclusion that the contractor is technically acceptable on an effort that cannot be defined sufficiently that a CPFF contract type is the best arrangement for the contracted effort.


    If, however, you still believe that the PPT is the approach to apply, I would suggest that the model to undertake would be the “With Technical Proposals” under
    paragraph 3.2.  This would allow you to evaluate the technical uncertainties that warrant the use of a CPFF contract type.  You would then need to modify the Section L and Section M to specify the information to be submitted and the evaluation methodology for performing the cost realism and arriving at the evaluated amount that “…the Government should realistically expect to pay for the proposed effort…”  As long as your methodology is clear (state that you’ll be using the lowest Most Probable Cost (MPC) and how it will be calculated), unbiased, and consistently applied to all offerors, you should be able to use the PPT methodology and award a CPFF contract.  A footnote, do you want the lowest MPC or the ability to select the “best technical” cost and other factors considered?

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