Unidentified supplier in certified cost or pricing data

It will be very easy to ask the offeror to identify the supplier.

ji20874 said:

It will be very easy to ask the offeror to identify the supplier.

And if they refuse to? Would the proposal be inadequate? Would you accept the COPD cert?

The sole source supplier of the non-commercial item exceeding the threshold for cost or pricing data must also submit cost or pricing data.  The government has the right to know who they are and has the right to audit their proposal. How can anyone audit an unknown supplier? The proposal is inadequate and less than full disclosure. 

EDIT: I may have misunderstood the scenario. Even if the suppliers are competing rather than sole source, this isn’t a secret acquisition.

Sunstrider said:

You are evaluating a proposal for non-commercial items in a sole source environment.

Non-commercial equipment to be purchased by the prime from a supplier exceeds the Truthful Cost or Pricing Data threshold in total value. 

However, the apparent successful equipment source/supplier is unidentified by the prime. In fact, all of the prospective suppliers are unidentified within the prime's evaluation of equipment quotes documented within their proposal.

I

Facts are not that clear to me. Is this post from a prime contractor or the Government? Which is the sole source...the prime contractor or the subcontractor? Did the prime propose a listing of equipment to be purchased only from one source at one time or is it a time phased purchase to match the funding profile such that none of the contemplated purchases exceed TINA ? How is it known what supplier is "the apparent successful...supplier? In many situations, prime contractors have not yet evaluated, made a source decision or awarded an subcontract at the time of a proposal to the Government. Could the post please clarify who is who here? Thanks.

Neil Roberts said:

Facts are not that clear to me. Is this post from a prime contractor or the Government? Which is the sole source...the prime contractor or the subcontractor? Did the prime propose a listing of equipment to be purchased only from one source at one time or is it a time phased purchase to match the funding profile such that none of the contemplated purchases exceed TINA ? How is it known what supplier is "the apparent successful...supplier? In many situations, prime contractors have not yet evaluated, made a source decision or awarded an subcontract at the time of a proposal to the Government. Could the post please clarify who is who here? Thanks.

The prime contractor is the sole source. The prime will provide non-commercial equipment to the Government, which they will have purchased all via a single supplier. The equipment does not have to be purchased from a single supplier; however this is what the prime has proposed.

Additionally, worthy of note is that the total value of these equipment items exceeds Truth in Cost or Pricing Data threshold.

The prime's proposal purchase attempts to show adequate price competition, where there is a crude analysis of all supplier quotes. However, my concern is that the only information really provided is each supplier's bottom line price and whether that supplier comprised the "best value" or not. Imagine reviewing a heavily redacted "streamlined PNM" or brief pricing memo as the basis for all of prime's equipment costs. Not a single supplier is identified, especially not from whom they will purchase.

Is the prime contract cost-type or FFP? Is the proposed subK cost-type or FFP?

here_2_help said:

Is the prime contract cost-type or FFP? Is the proposed subK cost-type or FFP?

Prime is FFP. Not specified for the sub.

**Audit them...

EDIT- ADDED: In addition, for your own ability to review and verify the vendors’ proposals, see Table 15-2 Instructions at 15.408

“A. Materials and services. Provide a consolidated priced summary of individual material quantities included in the various tasks, orders, or line items being proposed and the basis for pricing (vendor quotes, invoice prices, etc.). Include raw materials, parts, components, assemblies, and services to be produced or performed by others. For all items proposed, identify the item and show the source, quantity, and price.”

Tell, not ask, them to identify the sources and provide the vendor quotes to be able to verify their basis of pricing the subcontracts.  You have the right to verify that the supplier quotes support/match their proposal/ PNM narratives, etc.  “Trust, but verify” or when doubtful, due to less than reasonable disclosure, “Verify to build trust”.***

In addition, Table 15-2 Instructions also state:

“(1) Adequate Price Competition. Provide data showing the degree of competition and the basis for establishing the source and reasonableness of price for those acquisitions (such as subcontracts, purchase orders, material order, etc.) exceeding, or expected to exceed, the appropriate threshold set forth at FAR 15.403-4 priced on the basis of adequate price competition. For interorganizational transfers priced at other than the cost of comparable competitive commercial work of the division, subsidiary, or affiliate of the contractor, explain the pricing method (see FAR 31.205-26(e)). “

** If this is a major Defense (or various other Agencies) Contractor, there are usually DCAA or other auditors assigned to provide audit services or simply field pricing support, short of a formal audit.  If necessary, you can hire an auditor to do a limited audit to review and verify the subcontract vendor quotes. But you shouldn’t have to do that if the prime is up and up. 

***There were valid reasons for calling the original Statute the “TRUTH in Negotiations ACT”.

Thanks for the clarification, Sunstrider.  

I assume this is a negotiated procurement and you will be receiving certified cost or pricing data from the prime contractor. You may eventually have post award justification to request an audit. In the meantime, since the prime is a sole source, suggest the best interest of the Government is for you to use your negotiation skills to request additional support for any questionable subcontractor pricing information/analysis. You do not have any other source of supply available to support the schedule at this time. Not sure why your focus is on subcontractor TINA requirements. If that subcontractor is already the lowest priced bidder and meets the requirements, what are your additional expectations? Communicate them to the prime. The prime may assert that there is adequate price competition, which eliminates TINA requirements for the subcontractor.

I tend to agree with Neil Roberts on this one.

The government wants to negotiate a sole-source FFP prime contract. As part of its proposal, the prime has submitted a proposed price for a subcontractor. The prime determined the price to be fair and reasonable based on obtaining adequate competition. The prime has provided the source evaluation and selection notes to the government as part of its cost or pricing data. The government is concerned that the source evaluation or selection notes are not robust. In particular, the apparent winning subcontractor is not identified by name.

The issue is not compliance with TINA as the prime has obtained adequate price competition (or asserts that it has done so). The issue is whether or not the proposed price for the subK is fair and reasonable. This is a matter for negotiation. Perhaps start by saying that you will accept the low bid rather than the one the prime has chosen to support its price (assuming the chosen subK is other than lowest price). See what the prime does in response.

As Neil Roberts noted, the government will have post-award audit rights to see whether or not the proposal was defectively priced because the prime didn't include all cost or pricing information. I agree that the government should use those rights. In the meantime, negotiate hard using the lack of information as the basis for mitigating the government's risks.

Its not a subcontractor TINA issue. It’s a prime contractor TINA issue. The government has the right to not only know who the competing suppliers- plural - are, it can also see the quotes or proposals to verify that what the prime SAYS the proposal is, is in fact what it is. 

Based upon personal experience, that isn’t always the case. 

If this prime wont even reveal who the selected sub or other quoters are,  I have no basis to trust anything else that it says in a redacted summary.  

It’s not the auditor’s responsibility to dig for data in a post-audit review that the contractor should have provided to facilitate an effective proposal evaluation and negotiations.

Joel, would you agree that if the prime had adequate price competition, it could use price analysis to determine that the proposed subcontractor's price was fair and reasonable. Assuming that was the case, what else does the government need to know? What other information could reasonably be expected to affect price negotiations significantly? Please identify which cost or pricing data the prime has not provided with respect to its proposed subcontractor cost.

here_2_help said:

Joel, would you agree that if the prime had adequate price competition, it could use price analysis to determine that the proposed subcontractor's price was fair and reasonable. Assuming that was the case, what else does the government need to know? What other information could reasonably be expected to affect price negotiations significantly? Please identify which cost or pricing data the prime has not provided with respect to its proposed subcontractor cost.

H2H, I would need to know who the sub is before I would agree to the price for award. There may be a reason to object to the sub.

I would need to verify what the actual quotes were. If I had separate price information, for example, knowledge of a lower priced source or that one of the sources in the competition would, could or has offered a lower price or recently sold the same items for lower price(s),  then I would want to be in a position to bargain for better prices. There are many scenarios possible. 

Therefore, NO. I don’t automatically take it for granted that the proposed Subcontractor’s price is fair and reasonable, especially if I can’t verify that the actual quote is what is being offered or who is offering it, what the other prices are and who offered them. 

For that matter, they could all be high for some reasons, such as misunderstanding the requirement, a contingency or other cause for unusually high or low pricing. 

I’ve experienced instances where , upon investigation, all competing prospective subcontract suppliers had included significant contingencies, which we were able to mitigate, resulting in vastly reduced prices (over $2 million in one instance).

We have discovered ambiguous, faulty or unnecessary aspects in our specs or statement of work that caused high pricing for all competitors, whether primes and/or subs.

We’ve found alternate sources which, were significantly lower in price for major items ($3 million in one case). We saved the three million plus the difference in markup. We had to know who the firms were getting pricing from and how much the quotes were for. 

We’ve occasionally experienced instances where the prime was less than truthful about the amount of the actual subcontract proposal.

Honestly, I am not intending to brag here. My purpose is to emphasize why it is important to be thorough. I am attempting  to share some reasons, learned through experience,  why government negotiators and KO’s should use sound business judgement. Don’t take it for granted that merely having competition, by definition,  will assure that prices are fair and reasonable.

Think about this. What motivation does a sole source, FFP prime contractor have to save the government money by proposing lower prices? Why would it perform more than a cursory mandatory price analysis of subcontractor quotes? Why would it dig into subs’ prices? Why should it bargain with proposed subs (before the award of the prime contract action)?  Why would it want to provide the government with more than a bare minimum amount proposal detail, etc.?

Does the FAR mention that reality in its default assumption that “adequate” competition at some level will assure fair and reasonable pricing?  What is “adequate” competition anyway? 

The reality is that there is one heck of a lot of difference between the effort a sole source prime contractor will devote to pricing it’s subcontracts before and after awarded the contract action.

I’m not going to ask and don’t need to know why  but suspect that there are some pretty good reasons why Sunstrider asked the questions here...

here_2_help said:

I tend to agree with Neil Roberts on this one.

The government wants to negotiate a sole-source FFP prime contract. As part of its proposal, the prime has submitted a proposed price for a subcontractor. The prime determined the price to be fair and reasonable based on obtaining adequate competition. The prime has provided the source evaluation and selection notes to the government as part of its cost or pricing data. The government is concerned that the source evaluation or selection notes are not robust. In particular, the apparent winning subcontractor is not identified by name.

The issue is not compliance with TINA as the prime has obtained adequate price competition (or asserts that it has done so). The issue is whether or not the proposed price for the subK is fair and reasonable. This is a matter for negotiation. Perhaps start by saying that you will accept the low bid rather than the one the prime has chosen to support its price (assuming the chosen subK is other than lowest price). See what the prime does in response.

As Neil Roberts noted, the government will have post-award audit rights to see whether or not the proposal was defectively priced because the prime didn't include all cost or pricing information. I agree that the government should use those rights. In the meantime, negotiate hard using the lack of information as the basis for mitigating the government's risks.

Yes, the chosen supplier is other than lowest price.

Sunstrider, my question to you is this. Do you have enough information to either 1) agree that the proposed price and subcontract amount are “fair and reasonable” for preparation for negotiations and for negotiation purposes or 2) if not certain that they are, do you have enough information to conduct an intelligent proposal analysis, prepare a pre-negotiation objective, and negotiate with the contractor?

Sunstrider, can you state in what way you believe the prime contractor has failed to comply with FAR 15.404-3?

Retreadfed said:

Sunstrider, can you state in what way you believe the prime contractor has failed to comply with FAR 15.404-3?

Did you mean 15.403-5 and 15.408?

joel hoffman said:

Did you mean 15.403-5 and 15.408?

No, I correctly identified the section I had in mind.

Retreadfed said:

No, I correctly identified the section I had in mind.

Oh yes, I see.

 So part of your question would relate to whether the contractor provided adequate subcontractor information for the contracting officer to analyze the subcontractor information provided by the contractor (per 15.404-3). Makes sense. 

Regarding other aspects of 15.404-3,  I think that Sunstrider already indicated what he/she thought about the adequacy of the prime contractor review and cursory price analysis. If it had been adequate, Why do you think Sunstrider initiated this thread? The sole source contractor has little incentive to do more than the bare minimum concerning pricing a subcontract.

Which makes it all the more necessary for the KO to analyze the subcontractor data. 

What data is there to analyze? Also, we don’t even know any of the firms’ names.

But that’s only my opinion.

joel hoffman said:

Also, we don’t even know any of the firms’ names.

That seems to have been Sunstrider's biggest issue.  However, my question is whether the identify of a subcontractor is cost or pricing data that must be certified?  It certainly would be relevant in granting consent to subcontract post-award.

EDITED: Is the identity of the selected subcontractor cost or pricing data for the prime?  I think so. That should be evident. Some firm has proposed a price, which has been allegedly used as a basis for the overall proposed price. Who the firm is and its price would be factual rather than judgemental data. The other proposers’ (the “competitors”) identities and prices are also factual data which are part of the proposal.

Quote

“Cost or pricing data” (10 U.S.C.2306a(h)(1) and 41 U.S.C. chapter 35) means all facts that, as of the date of price agreement, or, if applicable, an earlier date agreed upon between the parties that is as close as practicable to the date of agreement on price, prudent buyers and sellers would reasonably expect to affect price negotiations significantly. Cost or pricing data are factual, not judgmental; and are verifiable. While they do not indicate the accuracy of the prospective contractor’s judgment about estimated future costs or projections, they do include the data forming the basis for that judgment. Cost or pricing data are more than historical accounting data; they are all the facts that can be reasonably expected to contribute to the soundness of estimates of future costs and to the validity of determinations of costs already incurred. They also include, but are not limited to, such factors as-

 (1) Vendor quotations;

(2) Nonrecurring costs;

(3) Information on changes in production methods and in production or purchasing volume;

(4) Data supporting projections of business prospects and objectives and related operations costs;

(5) Unit-cost trends such as those associated with labor efficiency;

(6) Make-or-buy decisions;

(7) Estimated resources to attain business goals; and

(8) Information on management decisions that could have a significant bearing on costs.

Emphasis added.

Please show me where in the FAR definition of "cost or pricing data" suppliers' names are included. Certainly the suppliers' names are facts, but I contend that suppliers' names are not any kind of facts that prudent buyers and sellers would reasonably expect to affect price negotiations significantly. Therefore the names do not meet the definition of "cost or pricing data" and do not need to be disclosed for TINA compliance purposes.

here_2_help said:

I contend that suppliers' names are not any kind of facts that prudent buyers and sellers would reasonably expect to affect price negotiations significantly

I tend to agree with H2H unless there is something more such as the selected subcontractor being debarred or suspended.

“Vendor quotations”, which is considered cost or pricing data per H2H’s quoted reference,  would identify the vendor. Get real here fellows!  This is unbelievable

You would apparently advocate the buyer not having the right to know who will produce or provide the product or who the competitors were and their prices and other criteria that was considered in the selection.  

This was a “best value” selection by the prime, involving quality of the product or supplier in addition to price. 

And the government couldn’t determine whether the sub is suspended or debarred before award. 

The idea of a prime proposing and justifying secret subcontracting is one of the more ridiculous arguments I’ve ever heard of. 

I’d expect to see the vendor quotations.

joel hoffman said:

EDITED: Is the identity of the selected subcontractor cost or pricing data for the prime?  I think so. That should be evident. Some firm has proposed a price, which has been allegedly used as a basis for the overall proposed price. Who the firm is and its price would be factual rather than judgemental data. The other proposers’ (the “competitors”) identities and prices are also factual data which are part of the proposal.

Vendor quotations are not anonymous. The vendors produce and provide the quotations. I’ve never seen an anonymous vendor quotation provided to a contractor. Vendor quotations are examples of cost or pricing data. 

I cant believe that I am wasting my time  justifying why a prime would be required to identify who the selected sub is or who the other firms were that the prime is using to substantiate that there was adequate competition.

This sub, it’s price, it’s products and how the sub was selected comprise the bulk of the scope and cost of the contract action.  They are factual data “that prudent buyers and sellers would reasonably expect to affect price negotiations significantly”, unless the buyer is a moron.

joel hoffman said:

Sunstrider, my question to you is this. Do you have enough information to either 1) agree that the proposed price and subcontract amount are “fair and reasonable” for preparation for negotiations and for negotiation purposes or 2) if not certain that they are, do you have enough information to conduct an intelligent proposal analysis, prepare a pre-negotiation objective, and negotiate with the contractor?

I do have very recent historical pricing that shows the prime can get a much better deal from their supplier. Were they to purchase from one of their lower-priced suppliers, price would be otherwise fair and reasonable.

As things stand, the prime clings to the supplier who's quoted the highest price among the unidentified suppliers. I have no way of verifying the identity, cost breakdown, responsibility, or delivery schedule of any of the suppliers. Truly, I cannot even verify the suppliers' prices since I don't have their quotes. As mentioned, both the prime proposal and the supplies to be purchased (from the one supplier) exceed the TINA threshold. And yes, the supplies comprise greater than 10% of the prime's total price IAW FAR 15.404-3(c)(1)(ii).

Sunstrider said:

I do have very recent historical pricing that shows the prime can get a much better deal from their supplier. Were they to purchase from one of their lower-priced suppliers, price would be otherwise fair and reasonable.

As things stand, the prime clings to the supplier who's quoted the highest price among the unidentified suppliers. I have no way of verifying the identity, cost breakdown, responsibility, or delivery schedule of any of the suppliers. Truly, I cannot even verify the suppliers' prices since I don't have their quotes. As mentioned, both the prime proposal and the supplies to be purchased (from the one supplier) exceed the TINA threshold. And yes, the supplies comprise greater than 10% of the prime's total price IAW FAR 15.404-3(c)(1)(ii).

Thanks, Sunstrider.  You are definitely NOT a Moron!  I think that you have enough ammunition to demand that the contractor or perspective contractor pony up the necessary information for you to analyze the proposal. Good luck.

Sunstrider said:

As mentioned, both the prime proposal and the supplies to be purchased (from the one supplier) exceed the TINA threshold. And yes, the supplies comprise greater than 10% of the prime's total price IAW FAR 15.404-3(c)(1)(ii).

To clarify -  I will venture an opinion, based upon the limited information available herein, that the subcontractors would qualify for an exception to providing “cost or pricing data” breakdowns to support their prices (15.404-1 (b). They allegedly submitted quotes or proposals in a competitive environment.

But that doesn’t automatically make the prices of one or any of the quotes “fair and reasonable” (not directed at Sunrider)

It aggavates me when government personnel (not directed at Sunrider) fall back on one sentence in 15.404-1 to assume that prices received through competition automatically define those prices as “fair and reasonable” - especially when comparison with prior pricing shows significant differences (as Sunrider can attest to here) - especially if the government evaluator doesn’t have a clue what the  items should or could cost and makes little or no effort to independently research the matter - especially if the prime contractor/Offeror is proposing under sole source circumstances (as I described hereinafter) with little or no incentive to examine or bargain for good market pricing  - using the excuse that there was competition. The higher the proposed direct costs are, the higher the fee or profit allowance - especially if the prime will bid shop after award and/or pressure the sub to lower its price after prime contract award.

— The vendor quotes themselves ARE cost or pricing data in the prime contractor’s proposal.  They are used to develop and support the price proposed by the contractor, which exceeds the cost or pricing threshold. I hope that readers understand that important distinction.

However, that doesn’t preclude the government from requesting that the prime contractor obtain and provide “data other than cost or pricing data” from a sub(s), if necessary to evaluate the price reasonableness of a sub (subs’) quote(s). I don’t know what information might be necessary here.

Just making the point that an exception to “(certified) cost or pricing data” doesn’t mean that no “data other than cost or pricing”  can be required to support a subcontract price.

And one can negotiate proposed subcontract pricing obtained through “competition”. 

The above is not meant as any criticism here of Sunrider. It’s a general observation, not directed at any specific poster.

Can we agree that this issue can be negotiated? Can we agree that Sunstrider can use the historical pricing he has as his negotiation objective? Or perhaps go even lower if prices are trending down in the supplier's industry? To me, it seems straightforward. Sunstrider simply declares that the government won't pay any more than X. Put the pressure on the prime to justify why X is too low. That justification may well include the information that Sunstrider needs. If it doesn't, then Sunstrider can reject the prime's justification as being inadequate (for all the reasons mentioned in this thread) and stick to X.

Post-award, if Sunstrider believes it's warranted, he can request a review of the prime contractor's estimating system. Post-award, Sunstrider can request a post-award (defective pricing) review by DCAA.

My point is, Sunstrider has a strategy available to overcome the barriers erected by the prime contractor.

here_2_help said:

Can we agree that this issue can be negotiated? Can we agree that Sunstrider can use the historical pricing he has as his negotiation objective? Or perhaps go even lower if prices are trending down in the supplier's industry? To me, it seems straightforward. Sunstrider simply declares that the government won't pay any more than X. Put the pressure on the prime to justify why X is too low. That justification may well include the information that Sunstrider needs. If it doesn't, then Sunstrider can reject the prime's justification as being inadequate (for all the reasons mentioned in this thread) and stick to X.

Post-award, if Sunstrider believes it's warranted, he can request a review of the prime contractor's estimating system. Post-award, Sunstrider can request a post-award (defective pricing) review by DCAA.

My point is, Sunstrider has a strategy available to overcome the barriers erected by the prime contractor.

The point is that the prime has to provide the vendor quotes with identification of who the firms are for each so that Sunstrider can evaluate the cost or pricing data and develop his/her prenegotiation objectives with “factual cost or pricing data”,  not have to speculate or guess who has proposed what in order to develop a PNO or have to discover after award via post audit. 

The liklihood of getting DCAA to perform a post audit on a smaller action are slim, based on my experience, unless they have on-site or otherwise assigned plant auditors. 

The proposal is deficient.

joel hoffman said:

The proposal is deficient.

See, DFARS 252.215-7009 item 14 and Table 15-2 Section II A " For all items proposed, identify the item and show the source, quantity, and price. "

Retreadfed said:

See, DFARS 252.215-7009 item 14 and Table 15-2 Section II A " For all items proposed, identify the item and show the source, quantity, and price. "

Ok.

And in addition, where the Offeror is justifying an exception to the requirement for a proposed sub to provide cost or pricing data, based upon adequate  competition and it selected the highest price offer as the “best value”,  let me see all the quotes...

Based on the information in the post, it is not an inadequate proposal.

The government may request to see the vendors quote, but don't have to if they believe it is fair and reasonable. If the materials/subcontracts in the prime proposal exceeded the TINA, they may rely on the past performance with this sole source prime?

A FFP sole source solicitation awarded on Best Value Continuum with no evaluation criterion

general_correspondence said:

The government may request to see the vendors quote, but don't have to if they believe it is fair and reasonable.

Based upon previous experience and the limited data in the proposal,  the OP said that he doesn’t have enough information to “believe it is fair and reasonable”.

general_correspondence said:

If the materials/subcontracts in the prime proposal exceeded the TINA, they may rely on the past performance with this sole source prime?

Is this an opinion or a question? Either way it doesn’t make any sense to me. What are you trying to say? Are you asking whether the OP can “just trust” the prime based upon the information provided in the proposal? Would you simply trust the proposer if it won’t even tell you who any of the firms are that quoted or who it selected? Especially if you recently bought the same item at a much lower price? Is it the same supplier? The OP doesn’t know if it is the same supplier or if the same supplier is one of the lower priced quotes. 

general_correspondence said:

A FFP sole source solicitation awarded on Best Value Continuum with no evaluation criterion

Are you referring to the prime contract action? We don’t know if it is a new contract or a modification to an existing contract. The OP only said it is a sole source action. The present contract action has nothing to do with best value at the prime level. 

The prime says that it selected the (unknown subcontractor) based upon  some type of best value competition between prospective subs. It selected the highest priced sub quote.

DCAA memo concerning contracting officer documentation of inadequate contractor proposals.

Note that Joel's link goes to a memo, directed at DCMA contracting officers, regarding how to respond when DCAA asserts a contractor's proposal is inadequate. From my reading, it does not address actions when the CO determines the proposal is not adequate--though obviously a parallel process would be followed in terms of file documentation.