Subs submitting un-sanitized cost proposals directly to govt. customer

The sub submits its certificate to the prime.  If there is defective subcontractor certified cost or pricing data, the government makes any required pricing  adjustment on the prime contract.  The prime then has to exercise any rights it may have against the sub for the sub submitting defective certified cost or pricing data.

The certified cost or pricing data may be provided directly to the government. The Certificate of Current Cost or Pricing Data is not executed until price agreement has been reached or other mutually agreeable date. (See the language at FAR 15.406-2. The parties fill in the Certificate with the date.) I also note that the Proposal Adequacy Checklist at DFARS 252.215-7009 does not require an executed Certification.

This assumes you and your subcontractor have not agreed on a price; I'm assuming you are awaiting award of the prime contract before awarding the subcontract.

TINA is a disclosure requirement and the responsibility does not end at proposal submission. Your subcontractor is required to keep its certified cost or pricing data accurate, complete, and current up to that date, just as you are. When you and the subcontractor agree on price (or other effective date) then you have your subcontractor execute the Certification and submit it to you for your files.

52.215-12 should be included in the prime. It requires contractor obtain a certificate of current cost pricing data from the subcontractor in substantially the form prescribed in FAR 15.406-2. That form certifies to the Contracting Officer or to the Contracting Officer’s Representative. This is because it is geared towards a certificate between the Contractor and the Government. My experience is a contractor should modify 15.406-2 form to substitute the name of the contractor in lieu of “Contracting Officer or to the Contracting Officer’s Representative” in all the usual cases for subcontract application. However, in your situation, my experience is to add “Contracting Officer or to the Contracting Officer’s Representative” back, in addition to the name of the contractor. The subcontractor can submit a sanitized cost or pricing data proposal to the Contractor and an un-sanitized one to the Contracting Officer or to the Contracting Officer’s Representative. A prime contractor can request DCAA audit assistance from the government to obtain the bottom-line dollar value impact of questionable rates and costs included in the un-sanitized proposal, for use in its analysis and negotiations.

Neil Roberts said:

The subcontractor can submit a sanitized cost or pricing data proposal to the Contractor and an un-sanitized one to the Contracting Officer or to the Contracting Officer’s Representative.

Just to be clear, the proposal is not cost or pricing data.

Retreadfed said:

Just to be clear, the proposal is not cost or pricing data.

Retreadfed, not sure what you are getting at. Could you please clarify?

Neil Roberts said:

Retreadfed, not sure what you are getting at. Could you please clarify?

I don't know what you mean by "cost or pricing data proposal."  Cost or pricing data are not submitted in the form of a proposal.  They are submitted in relation to a proposal.  That proposal is not part of the cost or pricing data.

I believe what I mean appears in FAR 15.408 Table 15-2--"Instructions for Submitting Cost/Price Proposals When Certified Cost or Pricing Data are Required.

Table 15-2 talks about a cost/price proposal.  It does not talk about a cost or pricing data proposal.

Cost or pricing data generally form parts of the proposal.

On 11/6/2020 at 9:09 PM, joel hoffman said:

Cost or pricing data generally form parts of the proposal.

I disagree.  Cost or pricing data are submitted in regard to a proposal, but they are generally not part of the proposal to create a new contract.  In most instances that I am familiar with, the contractor submits its proposal to the contracting agency, them submits the majority of the cost or pricing data it has in regard to the procurement to DCAA during an audit or a cost price analyst when the analyst is doing his/her fact finding concerning the price proposal.  If the contractor does a sweep in regard to data submitted, it will generally submit any new found data to the contracting officer with the certificate of current, complete and accurate cost or pricing data.  Other than sweep data, the PCO rarely sees the majority of the cost or pricing data relating to a procurement.

Retreadfed said:

I disagree.  Cost or pricing data are submitted in regard to a proposal, but they are generally not part of the proposal to create a new contract.  In most instances that I am familiar with, the contractor submits its proposal to the contracting agency, them submits the majority of the cost or pricing data it has in regard to the procurement to DCAA during an audit or a cost price analyst when the analyst is doing his/her fact finding concerning the price proposal.  If the contractor does a sweep in regard to data submitted, it will generally submit any new found data to the contracting officer with the certificate of current, complete and accurate cost or pricing data.  Other than sweep data, the PCO rarely sees the majority of the cost or pricing data relating to a procurement.

Not with my DoD agency. For sole source negotiated contracts and for mods and claims meeting the criteria for submission of C&P data, the proposer or contractor submits the data with the proposal, as support for the pricing, to the agency KO or ACO organization assigned to negotiate. The agency generally is supposed to perform a technical analysis and initiate the cost and price analyses. If the agency requires field pricing (audit) support, they will prepare an audit request or hire an auditor and send the proposal along with any specific questions, comments and or technical analysis to the audit agency. I negotiated contracts, mods and claims for this agency for 27 years in four different geographical  Divisions and assisted at least three other Districts in negotiating major mods and claims; that was how it was done.

We had our own auditors for Civil Works contracts until early 2000’s. The Agency now has DCAA laison auditors in many of their DistrictS and other Major offices.

The DCAA would specifically denote in the Audit Report whether the Agency provided a technical analysis of the details in the proposal, which would require the Agency to possess and review the details.  In my experience, the DCAA auditors were not very familiar with construction practices, technical aspects or even how construction equipment ownership and operating costs, repairs, shops, mechanics, etc. should be priced or accounted for (direct vs. indirect, etc.) . They needed a lot of coaching.

And audit efforts aren’t necessarily limited to that data in a proposal considered to be “cost or pricing data”.

We could ask them to verify or examine  above or below threshold subcontractor quotes, various material quotes or other specific judgmental data that was represented as being based on historic productivity in their earned value and estimating systems, for examples.

EDIT: Other examples, such as asking for a review of equipment inventories and availability, to determine reasonableness, necessity and/or economical choice of equipment (e.g., proposes D-9 dozers when smaller sized equipment is available and more suitable for the required work, etc.).

Retreadfed said:

Cost or pricing data are submitted in regard to a proposal, but they are generally not part of the proposal to create a new contract.

The poster, general__correspondence, can ask the contracting officer where and with whom in the government the subcontractor should coordinate its submission, and pass that along. The prime contractor post was not asking about its proposal to the government. The post was focused on subcontractors. My experience with top 3 prime contractors is that subcontractors are requested to and do submitted proposals with cost or pricing data included in the proposal, except in the rare case that general__correspondence is asking about. In the end, the certificate is certifying to cost or pricing data in support of a proposal or other submission involved, whether it is submitted with the proposal or by a separate submission.

Gentlemen,

Consider that a contractor's proposal is an estimate of future costs to be incurred, plus a profit or fee on those estimated future costs. That's all it is. That's all a proposal ever is.

Cost or pricing data (whether certified or not) are the facts upon which that cost estimate is based, or other factual information that prudent buyers and sellers would reasonably expect to affect price negotiations significantly.

Quote

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.

What I described applies to subcontractor proposals as well.  And primes have permitted us to negotiate directly with a sub that was required to submit cost or pricing data.

My comments concerning judgmental data were to further illustrate the fact that my organization receives the proposal, including the supporting data, not the DCAA. We would provide the proposal to the auditors when field pricing support for verification and cost analysis of the prime or a sub is requested.

EDIT: Add “While cost or pricing data 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. See also DCAA Manual 7640.1 ¶ 14-104.4.”  
From  Contract Attorneys Deskbook.If 

While prime or sub judgmental data is “other than C or P data”, the basis for it may often be examined by auditors and of course may be challenged and/or discussed during negotiations. There is no automatic presumption that a proposer’s, contractor’s Or subcontractor’s “judgment” are sacrosanct, reasonable or unassailable.

As examples, a construction company’s’ cost for an operation, choice of equipment  or major materials and installed equipment might be  accurate but its choice of means and methods might be wasteful, uneconomical, unnecessary or unreasonable. Yes, we realize that there are certain limitations of means and methods available to specific firms or our contractor.  But there are often alternate approaches available that may be faster and/or more economical.

That’s part of the technical analysis that may be provided with the request for audit and certainly one reason we negotiate. Too, depending upon the governments cost, time and quality goals and objectives, there can be trade offs between higher direct costs vs. saving fixed (time related) costs, etc.

Thus, the C or P Data and other than C or P data are included in the proposals we directly receive. Audits may be helpful but are not the primary means to analyze proposals and perform technical cost and price analyses.

On 11/8/2020 at 10:17 AM, Retreadfed said:

I disagree.  Cost or pricing data are submitted in regard to a proposal, but they are generally not part of the proposal...

FAR 15.408 Table 15-2 reads as follows:

1.C. As part of the specific information required, you must submit, with your proposal-

(1) Certified cost or pricing data (as defined at FAR 2.101). You must clearly identify on your cover sheet that certified cost or pricing data are included as part of the proposal (emphasis added).

Neil Roberts said:

FAR 15.408 Table 15-2 reads as follows:

1.C. As part of the specific information required, you must submit, with your proposal-

(1) Certified cost or pricing data (as defined at FAR 2.101). You must clearly identify on your cover sheet that certified cost or pricing data are included as part of the proposal (emphasis added).

Yes. However the certification of current cost or pricing doesn’t necessarily occur at the time of the initial submission.

joel hoffman said:

Yes. However the certification of current cost or pricing doesn’t necessarily occur at the time of the initial submission.

Yes. FAR 2.101 defines certified cost or pricing data as follows:
Certified cost or pricing data means "cost or pricing data" that were required to be submitted in accordance with FAR 15.403-4 and 15.403-5 and have been certified, or is required to be certified...

Neil and All

thanks for your comments, very helpful.  I think Neil nailed in the last post, "or is required to be certified"  per the Definition. 

My subcontractors, nor we as the prime, are signing a cert and sending it in with our proposal. Albeit required, the government's request is when the prime signs a cert.  That is when our subcontractors will send the prime a signed cert, before we the prime sign our cert.  if omission, errors, or changes have occurred since the initial proposal was submitted, it's resolved before we send our signed cert in.  That seems to make sense  Agree?

Seems to.

general_correspondence said:

My subcontractors, nor we as the prime, are signing a cert and sending it in with our proposal. Albeit required, the government's request is when the prime signs a cert.  That is when our subcontractors will send the prime a signed cert, before we the prime sign our cert.  if omission, errors, or changes have occurred since the initial proposal was submitted, it's resolved before we send our signed cert in.  That seems to make sense  Agree?

I do not agree. Per FAR 15.406-2, the Certificate is required from a subcontractor as close as practicable to the date when your company reached price agreement with the subcontractor, not when your company reached price agreement with the Government. The Government has no contractual relationship with the subcontractor. Contractors request cost or pricing data updates from subcontractors in writing to support the contractor negotiations with the Government as required. There is no subcontractor Certificate associated with such updates.

general_correspondence said:

My subcontractors, nor we as the prime, are signing a cert and sending it in with our proposal. Albeit required, the government's request is when the prime signs a cert.  That is when our subcontractors will send the prime a signed cert, before we the prime sign our cert.  if omission, errors, or changes have occurred since the initial proposal was submitted, it's resolved before we send our signed cert in.  That seems to make sense  Agree?

I largely agree with Neil here.  A certificate is not required when a proposal is submitted.  For subcontractor submission of certified cost or pricing data and certifications see, FAR 52.215-12.  If the prime and sub agree on the price of the subcontract before the prime and government agree on price.  The prime is required to get the certificate from the sub at that time.  If  the prime and sub have not reached agreement on price before the prime and government have reached agreement on price, the prime is to obtain a certificate from the sub and submit it along with the certificate from the prime.  In the latter case, the prime is required to get another certificate from the sub when the prime and sub reach agreement on price.

On 11/10/2020 at 4:58 PM, Neil Roberts said:

You must clearly identify on your cover sheet that certified cost or pricing data are included as part of the proposal (emphasis added).

If you look at 15-2, you will see that it really does not provide instructions for most of the data that would be considered cost or pricing data.  For example, this is what 15-2 says about the submission of cost or pricing data in regard to indirect cost rates "Indicate how you have computed and applied your indirect costs, including cost breakdowns. Show trends and budgetary data to provide a basis for evaluating the reasonableness of proposed rates. Indicate the rates used and provide an appropriate explanation."  Obviously, this would not come close to covering all data that would be considered cost or pricing data relating to the indirect costs a contractor may incur.

Similarly, in regard to direct labor, 15-2 says "Provide a time-phased (e.g., monthly, quarterly, etc.) breakdown of labor hours, rates, and cost by appropriate category, and furnish bases for estimates."  Again, this clearly does not encompass most of the cost or pricing data that relates to direct labor.

Retreadfed said:

If  the prime and sub have not reached agreement on price before the prime and government have reached agreement on price, the prime is to obtain a certificate from the sub and submit it along with the certificate from the prime.

Retreadfed, I certainly get that practice request by the Government and what it signifies. In that situation, a prime should further revise the Certificate that has already been revised for standard use between the prime and sub, i.e., contractor means offeror, etc. The further revision should at a minimum delete ** and *** language from the certificate if it already has not been deleted from it and/or include some language that it is being submitted in support of the price agreement between the contractor and the government.

Retreadfed said:

If you look at 15-2, you will see that it really does not provide instructions for most of the data that would be considered cost or pricing data.  For example, this is what 15-2 says about the submission of cost or pricing data in regard to indirect cost rates "Indicate how you have computed and applied your indirect costs, including cost breakdowns. Show trends and budgetary data to provide a basis for evaluating the reasonableness of proposed rates. Indicate the rates used and provide an appropriate explanation."  Obviously, this would not come close to covering all data that would be considered cost or pricing data relating to the indirect costs a contractor may incur.

Similarly, in regard to direct labor, 15-2 says "Provide a time-phased (e.g., monthly, quarterly, etc.) breakdown of labor hours, rates, and cost by appropriate category, and furnish bases for estimates."  Again, this clearly does not encompass most of the cost or pricing data that relates to direct labor.

My observation is that paragraph II Cost Elements requires a "breakdown" of your indirect cost rate and direct labor examples. Paragraph I General requires that cost or pricing data (see 2.101 definition) be submitted. Could it be that this fills in the apparent gap?

Neil Roberts said:

My observation is that paragraph II Cost Elements requires a "breakdown" of your indirect cost rate and direct labor examples. Paragraph I General requires that cost or pricing data (see 2.101 definition) be submitted. Could it be that this fills in the apparent gap?

I would say that the cost breakdown called for by Table 15-2 would require disclosure of individual rates, and possibly the total pools and bases.  However, these would generally be estimates of costs to be incurred, not factual data.  Factual data would primarily be actual costs incurred in the past.  Indirect cost pools consist of several cost elements, where each transaction regarding that cost element has to be examined to determine if it is cost or pricing data.  Also, the bases for indirect costs must include unallowable costs as well as allowable costs.  The factual records relating to these unallowable costs can be cost or pricing data.

In reality, if a contractor has a provisional billing rate, a Forward Pricing Rate Recommendation or a Forward Pricing Rate Agreement, that will be the  data the contractor submits in regard to a specific proposal and will be accepted by the government.  Note that cost or pricing data already submitted in regard to the FPRA does not need to be resubmitted in regard to a proposal where the FPRA applies.  Instead, all the contractor has to do is identify the data.  When the contractor certifies cost or pricing data submitted in regard to a proposal, that is when the contractor certifies the data submitted in regard to the FPRA.

Neil said: I do not agree. Per FAR 15.406-2, the Certificate is required from a subcontractor as close as practicable to the date when your company reached price agreement with the subcontractor,

I don't disagree with this either.

We haven't reached an agreement on price until the assist audit is completed, in which case if not completed by time of award if we should be that fortunate - a reopener clause has already been communicated to the subcontractor.

On 11/12/2020 at 11:51 AM, Retreadfed said:

I largely agree with Neil here.  A certificate is not required when a proposal is submitted.  For subcontractor submission of certified cost or pricing data and certifications see, FAR 52.215-12.  If the prime and sub agree on the price of the subcontract before the prime and government agree on price.  The prime is required to get the certificate from the sub at that time.  If  the prime and sub have not reached agreement on price before the prime and government have reached agreement on price, the prime is to obtain a certificate from the sub and submit it along with the certificate from the prime.  In the latter case, the prime is required to get another certificate from the sub when the prime and sub reach agreement on price.

Very long time reader, 1st time poster.

I respectfully disagree with the statement, “If the prime and sub have not reached agreement on price before the prime and government have reached agreement on price, the prime is to obtain a certificate from the sub and submit it along with the certificate from the prime.  In the latter case, the prime is required to get another certificate from the sub when the prime and sub reach agreement on price.”

There should only be one certificate per pricing action, it comes whenever two parties complete a negotiation over the threshold (and no exception exists).  If the prime and sub have not agreed on the price at the time the prime and government agree on price, the prime should ensure they have provided all information they have as of the date of price agreement (regarding the sub in this example) to the Government.  They should not ask the sub to provide a certificate until they are negotiated with the prime.  

This understanding is evidenced in a few places:

FAR clause 52.215-12, Subcontractor Certified Cost or Pricing Data directs the prime contractor, prior to the award of a subcontract expected to exceed the threshold for submission of certified cost or pricing data, to require the subcontractor to submit cost or pricing data. The clause further directs the prime contractor to require the subcontractor to certify that, to the best of the subcontractor's knowledge and belief, the data submitted were accurate, complete and current as of the date of agreement on the negotiated price of the subcontract. Nothing in this clause requires or even suggests that the subcontract has to be negotiated or the subcontractor's certificate of current cost or pricing data has to be executed prior to or concurrent with the prime contractor's certification of cost or pricing data.

 FAR clause 52.215-10, Price Reduction for Defective Certified Cost or Pricing Data, provides for a reduction in contract price if (1) a contractor or subcontractor furnished cost or pricing data that were not complete, accurate, and current as certified in its Certificate of Current Cost or pricing Data or (2) a subcontractor or prospective contractor furnished the contractor cost or pricing data that were not complete, accurate, and current as certified in the contractor’s Certificate of Current Cost or Pricing Data.  The latter provision contemplates the circumstance where the prime contractor has executed a Certificate of Current Cost or Pricing Data and the subcontractor or prospective subcontractor has not.

 The Armed Services Board of Contract Appeals has recognized that the Truth In Negotiations Act requires the submission of subcontractor cost or pricing data and the certification of such data as accurate, complete, and current upon two occasions: (1) as of the date of final price agreement between the prime contractor and the government; and (2) when the subcontractor and prime contractor agree on a negotiated subcontract price, which can occur months after agreement on the government's and prime contractor's price. McDonnell Aircraft Co., ASBCA No. 44504, 03-01 BCA 32154. In McDonnell, the prime contractor signed a Certificate of Current Cost or Pricing Data on August 16, 1988, certifying that its cost or pricing data was complete, accurate, and current as of June 24, 1988. Almost a year later, on August 2, 1989, the subcontractor executed a Certificate of Current Cost or pricing Data, certifying that the subcontractor's cost or pricing data was complete, accurate, and current as of January 16, 1989.

Far Clause 15.404-3, Subcontract pricing considerations

      (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.

      (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…

            (3) Subcontractor certified cost or pricing data shall be submitted in the format provided in Table  15-2 of 15.408…

           (4) Subcontractor certified cost or pricing data shall be current, accurate, and complete as of the date of price agreement.… The contractor shall update subcontractor’s data, as appropriate, during source selection and negotiations.

           (5) If there is more than one prospective subcontractor for any given work, the contractor need only submit to the Government certified cost or pricing data for the prospective subcontractor most likely to receive the award.

The quoted portions or 15.404-3 are consistent with 15.403-4.  The subcontractor certificate must precede award of the subcontract.  Where there is not yet an agreement on price, there is no requirement for subcontract certification.

Intrepid411 said:

I respectfully disagree with the statement, “If the prime and sub have not reached agreement on price before the prime and government have reached agreement on price, the prime is to obtain a certificate from the sub and submit it along with the certificate from the prime.  In the latter case, the prime is required to get another certificate from the sub when the prime and sub reach agreement on price.”

Agreed. In a previous post I suggested a way to placate a contracting officer that insisted there was no negotiated contract deal between the contractor and the government unless the prime obtained such a certificate from the subcontractor. The statement above that we both disagree with was not supported by any reference to a FAR requirement, but apparently some contracting officers practice it.