I’m working on a business writing question and need an explanation and answer to help me learn.
Question 1. (The following example highlights how “unit price analysis” keeps Government buyers aware of how unique factors in one acquisition can influence future unit prices. Read DFARS 215.404- 1(2)(i) through (iv), and DFARS 217.7505.)
About 9 months ago, your teammate executed a purchase for a noncommercial, sole-source spare part for $1,500 each, at a quantity of 100. In the past six months, due to an operational demand surge for depot maintenance, he executed 2 purchases for the same part. These last 2 purchases were executed at a unit cost of 1,500 per part for 100 parts, but included an additional $30,000 for expedited shipping and handling by air instead of rail. He executed the contract via a single CLIN worth $180,000, with descriptive data as “100 parts plus shipping and handling,” for a total CLIN price of $180,000. Regretfully, he did not document the surged operational demand or the expedited shipping costs.
Today, you are researching a routine purchase for 100 of these parts. What problems will you potentially face?
Describe what additional steps should have been taken in the last 2 purchases.
Remember, the prices we pay “now” become the basis for the prices we will pay in the future. Therefore, unless the FAR states an exception, our contract pricing documentation and CLIN structure must reflect an analysis of unit prices.
Question 2. (This example highlights a common issue known as “excessive pass-through” charges, and reveals how understanding of unit price analysis better equips contracting officers to handle these charges. Before reading the scenario, review FAR 52.215-22 (Limitation on Pass-through Charges— Identification of Subcontract Effort) and -23 (Limitation on Pass-through Charges), then answer the questions below.)
Early in a jet engine’s life cycle, a prime contractor awarded a subcontract for jet engine fan blades. The subcontractor’s cost to manufacture a set of fan blades was $800,000. In addition, at this phase of the engine’s life-cycle, the prime contractor was heavily involved in the development, manufacturing, and testing efforts. The prime contractor applied its material overhead rate, G&A, and profit to the subcontract. After fact-finding and negotiation, the Government paid $2,400,000 on a firm-fixed price contract, with a single Contract Line Item (CLIN) for the set of blades.
A year later, the blade design was stable, with no changes planned in the foreseeable future. The prime contractor was no longer directly engaged in managing the fan blade production or delivery. In fact, the subcontractor offered to ship the blades directly to the Government depot maintenance facility.
In a pre-proposal conference regarding the upcoming purchase of fan blade spares, the prime contractor intends to submit an FFP CLIN price of $1,000,000.
What price did we determine to be fair and reasonable a year ago?
What is the “intrinsic value” of the set of fan blades?
Would you include the provision at FAR 52.215-22 and clause at FAR 52.215-23 in this acquisition?
Appropriate Analysis Technique(s)
Learning Objective
Given contracting scenarios, identify the appropriate method of analysis, either price analysis, cost analysis, or cost realism analysis.
Introduction
This lesson explored the different types of analysis to be used when analyzing offeror(s) proposals. Complete the following questions based on the lecture, suggested resources, and slides.
Student Instructions: Given contracting scenarios, identify the appropriate method(s) of analysis. As a team, answer each question below, and list the FAR, PGI, or CPRG references that support your answer.
You are analyzing a firm-fixed price commercial services contract that was solicited competitively. Seven proposals were received. You perform what type of proposal analysis?
You are analyzing a cost reimbursement contract for R&D services. It is being solicited competitively and 3 offerors responded to the RFP. You perform what type of proposal analysis?
You are analyzing a sole-source modification to a firm-fixed-price contract that was competitively awarded, for a non-commercial service. The contractor is a small, disadvantaged business. The net value of the modification is a reduction of $750,000 worth of work, and adds $500,000. What type of proposal analysis would you perform?
You are analyzing a $500,000 proposal from an 8(a) contractor for a non-commercial service that is awarded on a sole-source basis pursuant to the requirements at FAR 19. What type of proposal analysis would you perform? What if the value was over $750,000?
You are analyzing a competitive firm fixed price contract for $950,000, for a non-commercial item. Prices were not set by law or regulation, and there was no basis for a TINA waiver. Though your Market Research indicated at least three contractors would submit proposals, only 1 offer was received. Per DOD guidance you re-advertised and still only one offer was received. What type of proposal analysis do you perform?Consider a Multiple Award Task Order contract (MATOC) for Information Technology (IT) services. Out of the 9 companies that competed for this contract, 3 companies received the actual contract award. The original award contains negotiated labor rates for the associated labor hour categories that relate to the work we need them to do under this contract.
You just sent out a task order RFP for IT support in Anchorage, Alaska. Part of the criteria for responding to a task order RFP requires the contractor to submit their Basis of Estimate (BOE) to help the Technical Evaluation Team understand if their proposal reflects a clear understanding of the work required as well as whether their approach to the requirement is feasible. The evaluation criteria is LPTA. The anticipated contract type for the order is FFP. Assume the dollar amount is $500,000, and the service is commercial.
Neither Company 1 nor Company 3 submits a proposal. You received letters from both companies explaining their reasoning for not responding to the TORFP. You review the technical report prepared that analyzed Company 2’s proposal and discover that there are significant other direct costs (including travel) associated with this work that are included in the company’s fixed price proposal. These costs are unique to this task order and no data exists within the government to validate the need and reasonableness of these costs.
Would you perform price analysis, cost analysis, and/or cost realism analysis if faced with this situation? Remember, price analysis examines proposed prices without analyzing each of the individual elements of cost – will that be adequate in this case?
Where in the CPRG might we look for guidance on analyzing certain types of costs, specifically the travel costs proposed as Other Direct Costs, and what questions might you ask regarding those costs?
Which specific price or cost analysis techniques would you perform to determine the price fair and reasonable?
