Award with a Proposal

If price negotiations between the Prime and customer are not yet complete, certification is still required.  However, if the prime has already negotiated and received award, then certification by the sub should not be required.

POST-SUBMITTAL EDIT:  Based on what Vern has posted below, I no longer hold this belief.  If 52.215-12 is included in the Prime flowdowns, cert at the sub level is required regardless of timing.

thanks Patrick.. I meant to title the post Award without a Proposal..oh well

Patrick Mathern said:

If price negotiations between the Prime and customer are not yet complete, certification is still required.  However, if the prime has already negotiated and received award, then certification by the sub should not be required.

Patrick:

Assuming that the prime contract contains FAR 52.215-12, is your answer consistent with that clause? Is it consistent with FAR 15.403-4(a)(1)(ii)?

It does.   The Prime will be required to certify.

Hi Vern -

I think so, but help me walk through this.  That citation references FAR 15.408 which references Table 15-2.  In Table 15-2, it notes that "The requirement for submission of certified cost or pricing data continues up to the time of agreement on price..." Therefore, if the Prime has already agreed to price with the Customer, Certification does not apply.

Since Certification applies between Customer and Prime (then waterfalls through the applicable subs,) alleviating the Cert at the Prime would then alleviate any benefit at the sub level.

Patrick:

Forget FAR 15.408, Table 15-2. Look at the clause that is (presumably) in the prime contract.

FAR 52.215-12, "Subcontractor Certified Cost or Pricing Data," tells the prime to get certified cost or pricing data from a subcontractor before awarding any subcontract valued in excess of the TINA threshold, unless an exception applies. The clause does not tie that obligation to any agreement between the government and the prime.

Thanks Vern.  What would they certify to?

The subcontractor would certify to the prime that any cost or pricing data it provided to the prime were accurate, complete, and current as of the date of agreement on price between the prime and the sub.

But there would be none provided.  They would still execute a cert?

Looking for Thoughts said:

Hi-

If a prime submits a Task Order proposal (CPFF) without getting a subcontractors proposal (using the Subs contractual rates set out in the IDQ) and estimating the hours themselves as well as the profit ...

I don't know what the prime told the awarding agency in its task order proposal but, depending on what was stated as the BOE for the subcontractor's costs, there may have been a false statement or two involved in this process. Suppose the subK doesn't agree that the price is acceptable ... what then? The prime will have represented that it had the subcontractor on board, which may have influenced the technical eval if nothing else, but then the subK doesn't perform the work. Not good, in my view.

Looking for Thoughts said:

Hi-

If a prime submits a Task Order proposal (CPFF) without getting a subcontractors proposal (using the Subs contractual rates set out in the IDQ) and estimating the hours themselves as well as the profit and then makes an award to the sub over 750k would the sub be obliged to provide Certified COPD?  I can't see how unless the sub went back and forth with the prime on the pricing. Looking at FAR 15.404 it addresses the requirement for CCOPD before an award over 750k, not a proposal.  Thoughts?

Would you please clarify at what point the prime and sub agreed on the price of the subcontract? Was it before the task order award or later?  And did the prime represent that the estimated subcontract amount was based upon an actual subcontract proposal? I'm just trying to understand the scenario. Thanks.

Looking for Thoughts said:

But there would be none provided.  They would still execute a cert?

What do you mean, "But there will be none provided"?

Looking for Thoughts said:

If a prime submits a Task Order proposal (CPFF) without getting a subcontractors proposal (using the Subs contractual rates set out in the IDQ) and estimating the hours themselves as well as the profit and then makes an award to the sub over 750k would the sub be obliged to provide Certified COPD?

The answer to that question is YES, if the prime is going to award a subcontract for the work. The clause at FAR 52.215-12 requires a prime to obtain certified cost or pricing data from a subcontractor before awarding "any" subcontract valued in excess of the TINA threshold, unless an exception applies, even if the prime negotiated the task order price with the government without getting a proposal from the sub.

The clause is as clear as it can be:

Quote

Before awarding any subcontract expected to exceed the threshold for submission of certified cost or pricing data at  FAR 15.403-4, on the date of agreement on price or the date of award, whichever is later; or before pricing any subcontract modification involving a pricing adjustment expected to exceed the threshold for submission of certified cost or pricing  data at  FAR 15.403-4, the Contractor shall require the  subcontractor to submit certified cost or pricing  data (actually or by specific identification in writing), in accordance with  FAR 15.408, Table 15-2 (to include any  information reasonably required to explain the  subcontractor's estimating process such as the judgmental factors applied and the mathematical or other methods used in the estimate, including those used in projecting from known data, and the nature and amount of any contingencies included in the price), unless an exception under  FAR 15.403-1 applies.

Emphasis added. If, after being awarded a task order, the prime is going to award a subcontract for performance of part of that task order, and if the subcontract will exceed the threshold, and if no exception applies, then the prime must obtain certified cost or pricing data from the sub before awarding the subcontract. If the prime already has a subcontract for that work and obtained certified cost or pricing data prior to the subcontract award, and will not award a new subcontract for the task, then the prime need not get certified cost or pricing data from the sub again before putting the sub to work.

Hi Vern -

Thanks for setting me straight!  We have used this approach for over ten years but based on the straightforward text in 52.215-12, I'm changing my tune (and process).  Very helpful discussion!

What I think is happening with the OP is that the prime is negotiating a task order with the government, has already negotiated an agreement on hourly T&M labor rates with a "subcontractor," and used those rates in combination with its own estimate of the number of hours the sub would need to complete its work under the task order when submitting a price to the government.

The question is: under that circumstance, does the prime have to get certified cost or pricing data from the "subcontractor."

The answer turns on whether the prime actually has a subcontract with the "subcontractor" for performance of the work under the task order or just an agreement on rates. If the prime has only an agreement on hourly labor rates and must enter into a contract with the subcontractor, or issue an order, for performance, then the answer is yes, the prime must get certified cost or pricing data.

An agreement on hourly T&M labor rates might not, in fact, be a subcontract. Is the subcontractor legally bound to perform? If not, and if a subcontract must be formed in order to bind the sub, then the requirement for certified cost or pricing data applies. Moreover, an agreement on T&M rates does not constitute a price for the subcontract work without an agreement on the number of hours the sub will need to complete its part of the job. That's because, as described in the FAR, a T&M contract is not complete until the parties have established a ceiling price for the work to be done, i.e., rates X hours. Thus, the CO must require the prime to require the sub to submit certified cost or pricing data in connection with the negotiation of a ceiling price for the subcontract awarded or order issued to the sub. See FAR 16.505(b)(3).

One might argue that a subcontract, being a private agreement, need not have a ceiling price, and thus the prime and its sub need not negotiate an agreement on a ceiling price in order to complete their subcontract. I think that's a good argument if you can get the CO to buy it.

Vern Edwards said:

What I think is happening with the OP is that the prime is negotiating a task order with the government. The prime has already negotiated hourly T&M labor rates with a "subcontractor" and, when submitting a price to the government, used those rates in combination with its own estimate of the number of hours the sub would need to complete its work under the task order. The question is: Does the prime have to get certified cost or pricing data from the 'subcontractor."

The answer turns on whether the prime actually has a subcontract with the "subcontractor" for performance of the work under the task order or just an agreement on rates. If the prime has only an agreement on hourly labor rates and must enter into a contract with the subcontractor, or issue an order, for performance, or give the sub an order, then the answer is yes, the prime must get certified cost or pricing data.

An agreement on hourly T&M labor rates might not, in fact, be a subcontract. Is the subcontractor legally bound to perform? If not, and if a subcontract must be formed in order to bind the sub, then the requirement for certified cost or pricing data applies. Moreover, an agreement on T&M rates does not constitute a price for the subcontract work without an agreement on the number of hours the sub will need to complete its part of the job. That's because, as described in the FAR, a T&M contract is not complete until the parties have established a ceiling price for the work to be done, i.e., rates X hours. Thus, the CO must require the prime to require the sub to submit certified cost or pricing data in connection with the negotiation of a ceiling price for the subcontract awarded or order issued to the sub. See FAR 16.505(b)(3).

One might argue that a subcontract, being a private agreement, need not have a ceiling price, and thus the prime and its sub need not negotiate an agreement on a ceiling price in order to complete their subcontract. I think that's a good argument if you can get the CO to buy it.

Or perhaps there is an actual subcontract in place ("the IDQ") that sets out "contractual rates" under the terms of which the prime may issue unilateral orders for specified numbers of hours of various labor categories, and the sub is bound to perform.  In that circumstance, I don't think certified cost or pricing data would be required.

Hi All- thanks for the great convo-

This is all "hypothetical" at this point.  The Prime IDIQ contract from the Gov't contains teammates rates.  When RFP's for DO's go out they are often very quick turn around so suppose the prime uses the contract rates and estimates hours and plugs in profit for various tasks.  When the DO is awarded the prime then parcels out work to various teammates. The ones that go over the CCPD threshold are problematical as no proposal was requested or received but I have found no exception for CCPD and was curious because in reality there was no proposal to certify to.  Does this help explain the scenario?

Looking for Thoughts said:

Hi All- thanks for the great convo-

This is all "hypothetical" at this point.  The Prime IDIQ contract from the Gov't contains teammates rates.  When RFP's for DO's go out they are often very quick turn around so suppose the prime uses the contract rates and estimates hours and plugs in profit for various tasks.  When the DO is awarded the prime then parcels out work to various teammates. The ones that go over the CCPD threshold are problematical as no proposal was requested or received but I have found no exception for CCPD and was curious because in reality there was no proposal to certify to.  Does this help explain the scenario?

Do the teammates have binding subcontracts under which they must accept orders for labor at specified rates?

Nope- Just BOA's with the rates...

Vern Edwards said:

What I think is happening with the OP is that the prime is negotiating a task order with the government, has already negotiated an agreement on hourly T&M labor rates with a "subcontractor," and used those rates in combination with its own estimate of the number of hours the sub would need to complete its work under the task order when submitting a price to the government.

The question is: under that circumstance, does the prime have to get certified cost or pricing data from the "subcontractor."

The answer turns on whether the prime actually has a subcontract with the "subcontractor" for performance of the work under the task order or just an agreement on rates. If the prime has only an agreement on hourly labor rates and must enter into a contract with the subcontractor, or issue an order, for performance, then the answer is yes, the prime must get certified cost or pricing data.

An agreement on hourly T&M labor rates might not, in fact, be a subcontract. Is the subcontractor legally bound to perform? If not, and if a subcontract must be formed in order to bind the sub, then the requirement for certified cost or pricing data applies. Moreover, an agreement on T&M rates does not constitute a price for the subcontract work without an agreement on the number of hours the sub will need to complete its part of the job. That's because, as described in the FAR, a T&M contract is not complete until the parties have established a ceiling price for the work to be done, i.e., rates X hours. Thus, the CO must require the prime to require the sub to submit certified cost or pricing data in connection with the negotiation of a ceiling price for the subcontract awarded or order issued to the sub. See FAR 16.505(b)(3).

One might argue that a subcontract, being a private agreement, need not have a ceiling price, and thus the prime and its sub need not negotiate an agreement on a ceiling price in order to complete their subcontract. I think that's a good argument if you can get the CO to buy it.

The award to the sub would be FFP, not T&M.   The plot sickens....

Looking for Thoughts said:

Nope- Just BOA's with the rates...

Then I think we're stuck with FAR !5.404-3(c), which says 

Quote

(C)  Any contractor or subcontractor that is required to submit certified cost or pricing data also shall obtain and analyze certified cost or pricing data before awarding any subcontract, purchase order, or modification expected to exceed the certified cost or pricing data threshold, unless an exception in 15.403-1(b) applies to that action.

as well as FAR 15.404-3(b)(3):

Quote

(b) The prime contractor or subcontractor shall—

...(3) When required by paragraph (c) of this subsection, submit subcontractor certified cost or pricing data to the Government as part of its own certified cost or pricing data.

So  it sounds to me like the subcontractor in your scenario is required by 15.404-3(c) to submit certified cost or pricing data, and thus the prime is required  by 15.404-3(b)(3) to obtain it from the sub and submit it "as part of its own certified cost or pricing data."

...unless an exception in 15.403-1(b) applies.

So what do you all think?  Just get a cert that says "none provided" in the proposal identification line?  There will be no proposal from them.  

Looking for Thoughts said:

When the DO is awarded the prime then parcels out work to various teammates. The ones that go over the CCPD threshold are problematical as no proposal was requested or received but I have found no exception for CCPD and was curious because in reality there was no proposal to certify to.  Does this help explain the scenario?

No. It does not help explain.

What does "parcels out" mean? What's a "teammate"? 

What kind of legal relationship exists or is created between the prime and the firm you call a "teammate"? If by "parcels out" you mean awarding a subcontract or issuing an order to the teammate, then parceling out creates a contractual relationship and the prime has to get cost or pricing data from the "teammate" if FAR 52.215-12 is in the prime contract. The prime has to get it even if the prime didn't have a proposal when it negotiated with the government.

Since you say that what you have in place is a basic ordering agreement, not a subcontract, you have to get certified cost or pricing data when you order the "teammate" to perform.

These kinds of questions must be answered through formal definition and legal analysis. If you think in terms like "parcels out" and "teammates," you can't get to an answer until your translate them into professional/regulatory language.

Looking for Thoughts, are you new to government contracting?

Navy_Contracting_4 said:

Or perhaps there is an actual subcontract in place ("the IDQ") that sets out "contractual rates" under the terms of which the prime may issue unilateral orders for specified numbers of hours of various labor categories, and the sub is bound to perform.  In that circumstance, I don't think certified cost or pricing data would be required.

Navy, what do you mean "I don't think"? Do you know?

Even if an IDIQ contract is in place between a prime and a subcontractor, the issuance of a T&M task order by the prime to the sub creates a newly priced subcontract, because hourly rates are only part of the equation, and the prime must obtain certified cost or pricing data from the subcontractor for the completion of the pricing. The same would not be true of a delivery order for a fixed-price item of supply, which is already fully priced.

Vern Edwards said:

No. It does not help explain.

What does "parcels out" mean? What's a "teammate"? 

What kind of legal relationship exists or is created between the prime and the firm you call a "teammate"? If by "parcels out" you mean awarding a subcontract or issuing an order to the teammate, then parceling out creates a contractual relationship and the prime has to get cost or pricing data from the "teammate" if FAR 52.215-12 is in the prime contract.

These kinds of questions must be answered through formal definition and legal analysis. If you think in terms like "parcels out" and "teammates," you can't get to an answer until your translate them into professional/regulatory language.

Looking for Thoughts, are you new to government contracting?

Vern-  No, not at all new to this.  Sorry for use of colloquial terms.  In this case "parceling out" means awarding work under the prime award  to the various companies with whom the Prime has BOA's (without guaranteed min or max).  Teammates are those subs who have BOA's with labor rates identified.  Again, I don't see any exception for CCPD but was hoping someone had run into this type of scenario.  Best Regards-

Looking:

Is FAR 52.215-12 in the prime contract?

Navy, based on your posts, it appears that you think FAR 15.404-3 applies to contractors.  Is that your belief, and if it is what is the basis for that belief?

Vern-

Sure is otherwise this would not be any concern.

Looking

Looking:

Okay. Well, the clause says what it says. I hope you're satisfied (if not happy) with the response.

Unfortunately, if all you have is a BOA for rates, and if by BOA you mean the same thing as FAR 16.703, then you have to get certified cost or pricing data for both the labor rates and estimated hours each time you issue an order to a subcontractor.

Vern

On ‎3‎/‎8‎/‎2017 at 8:36 AM, Looking for Thoughts said:

So what do you all think?  Just get a cert that says "none provided" in the proposal identification line?  There will be no proposal from them.  

So, I will leave this with one last question.  If the subcontractor will NOT be providing a proposal how does one comply with 52.215-12.  Just a cert per the bolded above?

Looking for Thoughts said:

Just a cert per the bolded above?

No.

You don't certify a proposal, and you surely don't certify nothing. You certify cost or pricing data submitted in accordance with the law and FAR 15.403-4. A proposal is not cost or pricing data, neither is no proposal.

You appear to think that because you didn't get a proposal from the sub before you submitted your proposal to the government that you need not get certified cost or pricing data from the sub. That's wrong. You're confusing a proposal with certified cost or pricing data. They are not the same thing. Read the definition of certified cost or pricing data at FAR 2.101.

At some point you must contract with the sub to do the work. You say that you have a "BOA" (basic ordering agreement) with your "team members." If by "BOA" you mean the kind of agreement described in FAR 16.703, then it is not a contract. So under what binding terms will the sub perform? At some point you must conclude a binding agreement with the sub on performance terms, including price (rates and hours), even if that means that you do nothing more than issue an order against the BOA that the sub accepts. Before you reach that agreement you must, in accordance with FAR 52.215-12, obtain certified cost or pricing data from the sub in support of the rates in the BOA and the hours that the contractor agrees to work.

If you decide to abide by the rates in the BOA, then the sub must submit cost or pricing data in support of those rates.

Certified cost or pricing data are not a proposal. They are information submitted in support of a proposal.

Really, Looking... what I'm telling you is contract pricing 101. (Well, maybe 201.) You simply must study the rules closely.

On 3/8/2017 at 1:55 PM, Vern Edwards said:

Navy, what do you mean "I don't think"? Do you know?

Even if an IDIQ contract is in place between a prime and a subcontractor, the issuance of a T&M task order by the prime to the sub creates a newly priced subcontract, because hourly rates are only part of the equation, and the prime must obtain certified cost or pricing data from the subcontractor for the completion of the pricing. The same would not be true of a delivery order for a fixed-price item of supply, which is already fully priced.

Vern,

Well, I obviously didn't "know," as you have explained why I was wrong, but since the order would be FFP., it would likely be FFP level-of-effort, in which case, wouldn't it be comparable to ordering supplies at set prices?

Navy:

It boils down to this: the prime contractor promised the Government that before it awards "any" subcontract that meets the criteria in 15.403-4 and for which no exception applies, it will get certified cost or pricing data from the prospective sub. Period. If Looking must award a subcontract for the task order, then he must get certified cost or pricing data. It makes no difference that the sub did not submit a proposal for the work.

Deleted due to irremediable formatting issues.

Navy_Contracting_4 said:

Since the order would be FFP., it would likely be FFP level-of-effort, in which case, wouldn't it be comparable to ordering supplies at set prices?

Navy:

It wouldn't matter, because Looking has only a BOA with his "teammates" about rates. A BOA like the ones described in FAR 16.703 is not a contract. In order to bind one the teammates to perform under the task order from the government, Looking would have to issue an order against the BOA, and a teammate would have to accept. In other words, he would have to award a subcontract. Under FAR 52.215-12 he must get certified cost or pricing data from the teammate before awarding a subcontract.

On 3/10/2017 at 8:29 AM, Vern Edwards said:

Navy:

It wouldn't matter, because Looking has only a BOA with his "teammates" about rates. A BOA like the ones described in FAR 16.703 is not a contract. In order to bind one the teammates to perform under the task order from the government, Looking would have to issue an order against the BOA, and a teammate would have to accept. In other words, he would have to award a subcontract. Under FAR 52.215-12 he must get certified cost or pricing data from the teammate before awarding a subcontract.

Vern,

Yes, I understand about BOAs and how they differ from subcontracts. That's why I told Looking (see my post from Wednesday at 11:08 AM) that in his scenario, certified cost or pricing data would be required.

In the post for which you took me to task, I postulated an alternative scenario – one in which there was a binding subcontract not a BOA – and suggested that in that scenario, cost or pricing data would not be required in conjunction with issuing orders.  Do you think otherwise?  If so, why?

Navy_Contracting_4 said:

In the post for which you took me to task, I postulated an alternative scenario – one in which there was a binding subcontract not a BOA – and suggested that in that scenario, cost or pricing data would not be required in conjunction with issuing orders.  Do you think otherwise?  If so, why?

Navy:

I don't recall taking you to task. You said you thought something and I asked whether you thought or knew. Do you think that's taking you to task? Really?

In any case, I addressed the above question six days ago, on 3/7/17 at 3:31pm, as follows:

Quote

If, after being awarded a task order, the prime is going to award a subcontract for performance of part of that task order, and if the subcontract will exceed the threshold, and if no exception applies, then the prime must obtain certified cost or pricing data from the sub before awarding the subcontract. If the prime already has a subcontract for that work and obtained certified cost or pricing data prior to the subcontract award, and will not award a new subcontract for the task, then the prime need not get certified cost or pricing data from the sub again before putting the sub to work.

I then added the following on 3/8/17 at 6:45am:

Quote

Even if an IDIQ contract is in place between a prime and a subcontractor, the issuance of a T&M task order by the prime to the sub creates a newly priced subcontract, because hourly rates are only part of the equation, and the prime must obtain certified cost or pricing data from the subcontractor for the completion of the pricing. The same would not be true of a delivery order for a fixed-price item of supply, which is already fully priced.

I think that's a good theory, but I don't know that it's valid.

An order against an IDIQ contract is a contract as defined by FAR 2.101. (See Don Mansfield's Blog, DAR Council Interprets "Contract" to Include Task and Delivery Orders, March 10, 2011.) On the same basis, an order from a prime to a sub is a subcontract. FAR 15.403-4 and 52.215-12 are crystal clear. If the prime is going to award "any" subcontract valued in excess of the TINA threshold, and if none of the exceptions in 15.403-1 apply, then the prime must require the sub to submit certified cost or pricing data. Neither the policy statement nor the clause makes any exception whatsoever that is based on preexisting or concurrent subcontracts. 

You could argue with a contracting officer about this until you're blue in the face, but you would have a hard time arguing with the words of the clause. What would you tell a judge--that the clause, while clear, defies common sense? The judge might say, Yeah, well, you agreed to it.

FAR 52.215-12 is not well-adapted to modern IDIQ contracts and subcontracts under which orders must be negotiated. On its face It requires the submission of certified cost or pricing data even in cases in which it seems to make no sense to do so. The FAR councils sidestepped the issue when they wrote the mealy-mouthed language of 16.505(b)(3), which boils down to: You guys figure it out. What we need is a clear policy for orders under IDIQ contracts and a cost or pricing data clause for IDIQ contracts that expresses that policy. 

What I say to contractors is: Avoid unnecessary risk. Err on the side of caution. Ask the CO who awarded the IDIQ contract for a written interpretation of the clause. Otherwise, comply with the plain language of your contract.

What I believe is actually happening is that no one is thinking about the issue, except occasionally.

By the way, here are the statutes. First 10 U.S.C. § 2306a:

Quote

(a) Required cost or pricing data and certification.--(1) The head of an agency shall require offerors, contractors, and subcontractors to make cost or pricing data available as follows... (C) An offeror for a subcontract (at any tier) of a contract under this chapter shall be required to submit cost or pricing data before the award of the subcontract if the prime contractor and each higher-tier subcontractor have been required to make available cost or pricing data under this section....

Second, 41 U.S.C. § 3504:

Quote

(a) When required.--The head of an executive agency shall require offerors, contractors, and subcontractors to make cost or pricing data available as follows... (3) Offeror for subcontract.--An offeror for a subcontract (at any tier) of a contract under this division shall be required to submit cost or pricing data before the award of the subcontract if the prime contractor and each higher-tier subcontractor have been required to make available cost or pricing data under this chapter....