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  • Question

    The FAR states that for each offer has to have a cost realism analysis for cost type contracts to determine the TEP. Does that mean that every offer received has to be GEMPC'd or can we state up front different criteria that reduces the number of offers the Government evaluates based on the intial proposed price?


    Answer

    Based on review of the FAR 15.404-1(d), FAR 15.305(a)(1), FAR 15.306(c)(1) and (2) with the statute at 41 U.S.C. 253b(d), and DoD's Source Selection Procedures, published by OSD/AT&L, March 4, 2011, excluding an offeror from the competitive range without conducting a cost realism analysis is not prohibited.  Before doing so, the PCO must:
      - state in the solicitation the Government reserves the right to award w/o discussions, but that if discussions are necessary, for purposes of efficiency, the Government intends to hold discussions only with the most highly rated proposals based on an evaluation of technical, technical risk, and past performance, without conducting a Government Estimated Most Probable Cost for each offeror; and,
      - document in the contract file how employing this process will benefit the Government with respect to gaining efficiencies in time to award, and minimizing proposal preparation costs to offerors who are not among the most highly rated with respect to technical, risk, and past performance (per FAR 1.102(d)).
     
    In addition, based on our review of the Contract Pricing Reference Guide, Vol 4, Ch 8, Section 8.3, eliminating proposals from a competition without conducting a cost realism analysis, could raise risks:
    - Cost realism analysis can reveal proposed costs are significantly higher or lower than the most probable costs.  Even firms with sophisticated estimating systems can submit unrealistic cost proposals.  To manage this risk, ensure the initial evaluation includes past performance, to assess how well the contractor's actual costs compare to total estimated cost.
    - Cost realism analysis is most commonly used to evaluate specific elements of each offeror's cost estimates, and reflects how clearly the offeror understands the requirement.  To manage this risk, ensure the initial evaluation includes technical analysis and a risk assessment, which will reveal how well the offeror understands the Government's requirement.
     

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