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Presented by Edmund K. Kowalski
Financial Services ffice !FS " #$dated %anuary &'( )**+
Contents of this Module
- Section 1 - Cost Analysis - Section 2 – Defining Costs - Section 3 – Source Selections - Section 4 - Cost Data Requirements - Section 5 – Field Pricing Support - Section 6 - Cost Allowability
Section 1 . Cost Analysis /efinition .
Definition of Cost Analysis The re iew an! e aluation of t"e se#arate cost elements an! #rofit in an offeror0s or contractor0s $ro$osal !includin1 cost or $ricin1 data or information other than cost or $ricin1 data"( and the a$$lication of 2ud1ement to determine how well the $ro$osed costs re$resent what the cost of the contract should be( assumin1 reasonable economy and efficiency !FA3 &'. ' .4*4!c" !&"".
most $robable cost and8or $rice 7 :t is the more costly method in terms of time and man$ower.Cost Analysis 7 $ aluates t"e se#arate cost elements% #rofit% an! facilities ca#ital cost of money &if #ro#ose!'( 7 #sed to evaluate8determine any or all of the followin19 .cost realism .Price and Cost Analysis Com$ared . .cost and8or $rice reasonableness . 7 /etermines whether the $rice is fair and reasonable. 5 .Price Analysis is the $rocess of e6aminin1 and e aluating a #ro#ose! #rice wit"out e aluating its se#arate cost elements and $ro$osed $rofit.
. .Cost analysis is one of the a$$roaches that should be used when a cost realism evaluation is re=uired. .Cost Analysis: When to apply it.certified cost data. .1.( non. :n this case( it still may be used if the $rice is determined to be unreasona le or you are considerin1 a cost realis! e"aluation >see FA3 &'.:t is $erformed if certified cost or pricing data are required.*'!a"!&"?..:t may be used to evaluate information other than cost or $ricin1 data( e. .@hen you $erform a cost analysis( you should also include a price analysis to "erify price reasona leness. . .<ormally( it is not needed if ade=uate $rice com$etition e6ists.
Section 2 /efinin1 Costs Performin1 a Cost Analysis E6am$les9 Pro$osed Price by Aa2or Cost Element
Contract Price # Cost $ Profit
" o n tr a c t $ r ic e
d ir e c t c o s t d ir e c t la b o r
e n g in e e rin g m a n u fa c tu rin g fie ld s e rv ic e IL S
p r o f it
in d ir e c t c o s t
tra v e l vendor to o lin g
d ir e c t m a te r ia l
ra w m a te ria l p u rc h a s e d p a rts s ta n d a rd c o m m e rc ia l ite m s s u b c o n tra c ts
b u r d e n (O /H )
e n g in e e rin g m a n u fa c tu rin g fie ld s e rv ic e IL S m a te ria l h a n d lin g
! " " # (" O # )
e n g in e e rin g m a n u fa c tu rin g fie ld s e rv ic e IL S m a te ria l h a n d lin g G& B
%otal Contract Cost &FA' ().*+),)- Cis
the sum of the direct D indirect costs allocable to the contract( incurred or to be incurred( less any allocable credits( $lus any a$$licable cost of money !Cost Accountin1 Standard 4&4".
<o cost shall be char1ed to a contract as a direct cost( if other costs incurred for the same $ur$ose in like circumstances have been char1ed as an indirect cost. E6am$les9 direct material and direct labor. && .All costs identified s$ecifically with a contract are direct costs for that contract and shall not be char1ed to another contract directly( or indirectly. .Direct Costs &FA' (). ./efinition9 /efinition /irect costs are identifiable to a final cost ob2ective !a $articular contract".*+*.
ndirect Costs &FA' (). ./efinition9 /efinition :ndirect costs are not directly identifiable with a final cost ob2ective !e.<o cost shall be char1ed to a contract as an indirect cost if other costs incurred for the same purpose in like circumstances have been char1ed as a direct cost to that contract or any other contract. &) . a $articular contract"( but identified with two or more final cost ob2ectives.The distribution of indirect costs to various contracts should rou1hly be based on the benefits received on each contract..1. .*+(.
For $racticality( any direct cost of minor dollar amount may be treated as an indirect cost if this treatment9 7 :s consistently applied across all contracts( and 7 Produces su stantially the sa!e results as treating the cost as a direct cost &.Alternati"e Direct Cost %reat!ent &FA' ().*+*. .
:ndirect Costs 7 Aaterial Fandlin1 7 Frin1e Benefits 7 verhead !or burden" 7 GDA E6$enses .$scalation &4 .Profit or Fee .in .Cost of Aoney .Purchased $arts and8or assemblies - ther /irect Costs 7 <onrecurrin1 costs 7 Subcontracts 7 Travel 7 Subcontracts 7 Aiscellaneous material 7 /iscounts( Scra$( :nventory Shrinka1e( D Frei1ht./irect Eabor Cost 7 Eabor Cate1ories 7 Eabor 3ates 7 Eabor Fours .Pro$osal Aa2or Cost Elements ./irect Aaterial Cost 7 The Actual Aaterials .3aw material .
Pre.3ead the solicitation( section B( and S @8P@S 7 @hat is bein1 $urchasedH .S @8P@S .Cost Analysis9 First Ste$ .<ot as easy as lookin1 at the Section B CE:<s and8or SE:<s 7 @hat are the solicitation re=uirements for the contractor and the 1overnmentH &' .u$( Price8Cost Evaluation Tem$late( Section E $rice8cost data re=uirements( and Section A $rice8cost evaluation factors 7 En1ineerin1 and $rice8cost in$ut .solicitation involvement by the $rice8cost analyst !FS " and en1ineer !ES " is recommended 7 Price8cost in$ut .Section B set.
Check the math9 7 :s the arithmetic correctH The Section B unit $rices multi$lied by the =uantities result in the total amountsH 7 /o the amounts IfootJH /o they add.Cost Analysis9 Second Ste$ .3ead the contractor0s $ro$osal $rice8cost narrative 7 :t will discuss the contractor0s $ro$osal structure( assum$tions( rationale( etc.An im$ortant source of $ro$osal information .u$ and8or calculate correctlyH 7 /o the numbers ItrackJH Can the fi1ures be traced amon1 the su$$ort schedulesH &5 .Study8know the $ro$osal set.The len1th and =uality will vary .u$ . .
.The contractor0s res$onses $rovide the answer to the =uestion9 7 @hy is this $rice and8or cost reasonableH &.@hat is the basis of the $ro$osed costH 7 7 7 7 Fow did you come u$ with this numberH @hat is your rationaleH @hat are your assum$tionsH @hat are the calculations you usedH .Cost Analysis9 Third Ste$ .
Co!!on !ethods9 7 Roun! )able: E6$erts 1et to1ether and make 2ud1ments on $ro2ected costs 7 Com#arison: Ad2ustments are made to a $ast or current item to derive the cost 7 *arametric: Pro2ections are based on formulas( or cost estimatin1 relationshi$s 7 Detaile!: A thorou1h review is made( with detailed information com$risin1 the estimate &+ . .Cost /sti!ating Methods 0sed y the Contractor An offeror may use any 1enerally acce$ted estimatin1 methods that are equita le and consistently applied in si!ilar situations.
"a tit+ Total Price Rate #ase $mo" t 100 1 2 103 2. 32 . 12 3.0 163 10 202 2 204 2 406 1' 2' 100 101 .Basic Cost Element Breakdown $roposed $rice %& "ost 'lement Item/Service: RFP: CLIN: SLIN: Date/Time: 4/21/2006 13:43 File Name: %ase $eriod Cost Eleme t: !o"rs %aterial: Direct %aterial Scra&/Disco" t/%iscella eo"s %aterial !a (li ) Total %aterial Direct La*or: La*or Cate)or+ 1 .-00 2-00 3-36 3' 4' 3.' 1' 163 202 &B . 1 2 100 .0 1. La*or Cate)or+ 2 6 Total 11 Fri )e #e e/its 0ver1ea( 0t1er Direct Costs 30DC4s5 S"*co tracts Travel Total 0DC4s S"*total 78$ E9&e ses Total Costs Pro/it : it Price .
"a tit+ Total Price !o"rs Rate #ase $mo" t 100 1 2 103 2. 32 . 12 3.0 300 163 10 202 2 204 2 406 1' 2' 100 101 .Basic Cost Element Breakdown Cost Eleme t: %aterial: Direct %aterial Scra&/Disco" t/%iscella eo"s %aterial !a (li ) Total %aterial Direct La*or: La*or Cate)or+ 1 La*or Cate)or+ 2 Total Fri )e #e e/its 0ver1ea( 0t1er Direct Costs 30DC4s5: S"*co tracts Travel Tra s&ortatio Total 0DC4s S"*total 78$ E9&e ses Total Costs Pro/it : it Price .' 1' 163 202 )* . 6 11 .0 . 1 2 100 1.-00 < 2-00 < 3-36 < 3' 4' 3.
78$ TC +.5=365 3.5 335=345 (ates* CLIN/SLIN La*or Cate)or+ $"tomotive %ec1a ic %etal #o(+ Re&airma Elec Tec1/%ec1a ic F"el/Elec S+s %ec1a #ase @7T L*r Rate 40' 1-00 < 20' 2-00 < 30' 3-00 < ic 10' 4-00 < 100' 365 3.--.5 325 365 3105 3115 3125 3135 3145 31.5=3165 Est Est La*or Total !o"rs Price 3. $(? LR F# ST 0. Pro/it LLR Com&osite L Rate Esc 0-40 < 0-30 < 0-20 < 0-10 < 0001$$ Com&osite 1-00 < 0-01 < 1-01 < 0-02 < 1-03 < 0-03 < 1-06 < 0-04 < 1-10 < 0-01 < 1-11 < 100 111-46 < )& .E6am$le9 Eoaded Eabor 3ate Cost Element Breakdown Loaded Labor (ate "alculation )emplate Item/Service: RFP: CLIN: SLIN: Date/Time: 2/22/2006 11:02 File Name: 315 325 335 345 3.5 31. /.--.--.5 3165 31.5=325 3.--.5>365 3. 0/! ST 1.5>325 325=365 325>365 3115=3125 3115>3125 3135=3145 3135>3145 +.
SAMPLE C1S% 2'/A3D1W4 /--+ /--/ 45 / 0 /--0 +-6 7 0 0 )otal #aterial 2irect #aterial Handling Shrin3age Shop Supplies Scrap 45 / 0 )otal #at8l Labor Labor (ate Labor Hours +-- +-- +/- 0/- /5 1 01 05 1 )otal Labor Labor O/H O2" S/) G& $rofit/!ee "O# )otal $rice +-+5 /+5 /+5 5 /55 +/+5 /05 /+5 5 /95 +1+5 /95 /+5 5 0+5 070+5 9/5 715 +5 )) 615 .
.Cost Analysis9 Profit8Fee ).
4*4.4!c" Contractin1 fficer 3es$onsibilities9 Profit A Co tracti ) o//icer res&o si*ilities.FA3 &'. B 315 @1e t1e &rice e)otiatio is ot *ase( o cost a al+sisC co tracti ) o//icers are ot reD"ire( to a al+Ee &ro/itB 325 @1e t1e &rice e)otiatio is *ase( o cost a al+sisC co tracti ) o//icers i a)e cies t1at 1ave a str"ct"re( a&&roac1 s1all "se it to a al+Ee &ro/it)4 .
0 DD F0R% 1.-404F. B DF$RS 21./FA3S )&'.4!b"!&" Profit A De&artme ts a ( a)e cies m"st "se a str"ct"re( a&&roac1 /or (evelo&i ) a &reF e)otiatio &ro/it or /ee o*?ective o a + e)otiate( co tract actio G1e cost or &rici ) (ata is o*tai e(C e9ce&t /or costF&l"sF aGar(F/ee co tracts or co tracts Git1 Fe(erall+ F" (e( Researc1 a ( Develo&me t Ce tersB DF$RS 21.1 @ei)1te( 7"i(eli es %et1o( )' .-404F.4.4*4.
)5 .For other CPFF contracts( the fee shall not e6ceed &*K of the contract0s estimated cost( e6cludin1 fee. .For 3D/ work $erformed under a CPFF contract( the fee shall not e6ceed &'K of the contract0s estimated cost( e6cludin1 fee.-404F43c5345: Fee .F$R 1.en1ineer services for $ublic works or utilities( the contract $rice or the estimated cost and fee for $roduction and delivery of desi1ns( $lans( drawin1s( and s$ecifications shall not e6ceed 5K of the estimated cost of construction of the $ublic work or utility( e6cludin1 fees.For architect. . Statutory Eimitations .
A F$R 1.ne1otiation ob2ective for that chan1e or modification.The contractin1 officer shall not re=uire any $ros$ective contractor to submit breakouts or su$$ortin1 rationale for its $rofit or fee ob2ective but may consider it( if it is submitted voluntarily.5.-404F43c53. ).-404F43c5365.:f a chan1e or modification calls for essentially the same ty$e and mi6 of work as the basic contract and is of relatively small dollar value com$ared to the total contract value( the contractin1 officer may use the basic contract0s $rofit or fee rate as the $re. .Pro/itF%iscella eo"s A F$R 1.
.PG: )&'.4*4. )+ . or the modified weighted guidelines method.4*4. to designated office within 30 days after contract award .5!4"9 7 Contractin1 offices outside the #nited States and its outlyin1 areas are e6em$t from re$ortin1.PG: )&'. data.5!)"9 7 use Army @ei1hted Guidelines Software for re$ortin1 // Form &'4. .PG: )&'.5!&"9 – send completed DD Forms 1547 on actions that exceed the cost or pricing data threshold.Profit and Fee 3e$ortin1 . an alternate structured approach... where the contracting officer used the weighted guidelines method.4*4.
Section 3 7 Source Selection9 . Price 3easonableness . Com$leteness Cost 3ealism Analysis . Cost 3ealism .
<o FA3 definition .Three $rice8cost evaluation factors 7 Price reasonableness .<o FA3 definition .!Best Lalue" Source Selection9 Sect A Cost8Price Evaluation Criteria ./efined in the FA3 7 Com$leteness .Also #nbalanced Pricin1 . 7 Cost 3ealism .* .Price 'easona leness is deter!ined y the results of a price analysis.
4*4.FA' definition-9 An accurate reflection( within the cost8$rice $ro$osal( of all as$ects of the technical $ro$osalM com$liance with the cost8$rice $re$aration instructions in the 3FP Section E 7 :nstructions( Conditions( and <otices to fferorsM and com$liance with any other a$$licable directions. .Source Selection Sect A9 Cost8Price Evaluation Criteria Price 3easonableness9 <o FA3 definition 7 see ne6t slide Cost 3ealism9 Aeasure of the a$$ro$riateness of a cost to its corres$ondin1 work element. Com$leteness &non.&!d"". The Government will determine if the $ro$osed costs8$rice!s" are realistic for the work to be $erformed( reflect a clear understandin1 of the solicitation0s re=uirements( and are consistent with the various elements of the fferor0s technical $ro$osal !FA3 &'.& - .
. .A combination of any of the above 7 Price reasonableness will be determined based on the results of a $rice8cost analysis( includin1 a com$arison to the :GCE and . .Fow to /efine Price 3easonablenessH .)*&.A cost !substitute I$riceJ for cost" is reasonable if( in its nature and amount( it does not e6ceed what a $rudent $erson would $ay in the conduct of com$etitive business >FA3 .Price reasonableness will be determined based on9 7 the results of a $rice8cost analysis 7 the results of the a$$lication of the $rice analysis techni=ues detailed in the FA3 7 a com$arison to the :GCE 7 a com$arison of the com$etin1 offers .&.) com$arisons of the com$etin1 offers.!a"?.
3easonableness Per ES:0s Advanced Source Selection .Are the offeror0s cost estimatin1 methods reasonable and accurately $re$aredH .@hat is the level of =uality and credibility of the offeror0s basis of estimatesH 7 For e6am$le( are costs based on actual data or en1ineerin1 2ud1mentH . ..Are the offeror0s cost metrics and methods lo1ical and a$$ro$riate for the $roductH .
Com$leteness Per ES:0s Advanced Source Selection .Fas the offeror ca$tured all $ro$osed effort in the cost estimatesH ./id the offeror claim some $erformance in technical or mana1ement not included in the costH .4 .Are the technical assum$tions used in the cost $ro$osal traceable to the technical volume and vice versaH ./id the offeror $rovide all information re=uired by the 3FPH .
)&d.' .Cost 'ealis! Analysis: 5eneral FA' )5.6+6.'e"ie7 the specific ele!ents of each offeror8s cost esti!ate to deter!ine: 7 :f it0s realistic for the work to be done 7 :f the offeror clearly understands the require!ents 7 :f it0s consistent with the uni=ue as$ects of their technical $ro$osal .
7 :ndividually determine the #robable cost of $erformance of each offeror. . reimbursement contracts.5 . .For a CPFF contract( the fee would not be ad2usted.4*4. !Com$etitive environment only". .*robable cost is used in decidin1 best alue.Cost 'ealis! Analysis FA3 &'. . 7 *robable cost determined by ad2ustin1 each offeror0s costs( and fee when a$$ro$riate( to reflect any understatements or overstatements based on the results of the cost realism analysis.&!d"!)" &Cost 'ei! urse!ent Contracts.Probable Cost is the 1overnment0s best estimate of the cost of any contract that is likely to result from the offeror0s $ro$osal.The followin1 a$$ly to both com$etitive an! sole source environments9 7 Government s"all $erform cost realism analyses for cost.
." !Co!petiti"e Fi9ed Price Contracts" .3esults of the analysis may be used in perfor!ance ris: assess!ents and responsi ility deter!inations.Situations where cost realism analysis may be done on com$etitive fi6ed $rice contracts9 7 @hen new re=uirements may not be fully understood by com$etin1 offerors( or 7 There are =uality concerns( or 7 Past e6$erience indicates that contractors0 $ro$osed costs have resulted in =uality or service shortfalls . .Nou cannot ad2ust offered $rices as a result of the cost realism analysis.Cost 'ealis! Analysis FA3 &'.&!d"!.4*4. ..Aay be $erformed on Fi6ed Price :ncentive contracts. .
+ .Cost Analysis methods8$rocedures are used to determine Cost 3ealism.There is a difference between the two( but 7 Confusion between the terms 7 ften used interchan1eably . .Cost 3ealism Analysis and Cost Analysis .Cost 3ealism Analysis a$$lies to source selections 7 #sed to verify that the contractor0s technical a$$roach has been $riced in the $ro$osal 7 #sed mainly on cost reimbursement ty$e contracts 7 #sed to determine the Probable Cost of Performance !Aost Probable Cost" .
Section 4 . Cost /ata 3e=uirements Certified Cost or Pricing Data .nfor!ation 1ther %han Cost or Pricing Data .
1 taining . !Certified" cost or $ricin1 data .nfor!ation to /sta lish Price 'easona leness . 4* ./o not obtain more info than necessary 7 3ely first on information available within the Government. 7 :f necessary( on information obtained from the offeror. 7 Second( on information obtained from sources other than the offeror.FA' )5.6+*&a-< &and Cost 'ealis!rder of $reference for ty$e of data re=uired and8or re=uested9 & <o additional information ) :nformation other than cost or $ricin1 data .
:ntroduction to Cost /ata
- Two ty$es9
& !Certified" Cost or $ricin1 data ) :nformation ther than Cost or Pricin1 /ata
- Both can be the e6act same information - @hat is the difference between the twoH
7 For the first( the contractor certifies that the data is current( accurate( and com$lete. 7 For the second( the contractor !oes not certify that the data is current( accurate( and com$lete.
&Certified- Cost or Pricing Data Define! ;FA' *.)+)<
- All facts that( as of the date of $rice a1reement or( if a$$licable( an earlier date a1reed u$on between the $arties that is as close as $racticable to the date of a1reement on $rice( $rudent buyers and sellers would reasonably e6$ect to affect $rice ne1otiations si1nificantly.
7 7 7 7 Are factual( not 2ud1mental( and are verifiable. :ncludes data formin1 bases of 2ud1ements. Aore than historic accountin1 data. All facts contributin1 to soundness of estimates.
Certification of Cost or Pricing Data ;FA' )5.6+=,*<
- @hen cost or $ricin1 data are re=uired( the contractin1 officer shall re=uire the contractor to e6ecute a Certificate of Current Cost or *ricing Data.
7 ITo the best of my knowled1e and belief( t"e cost or #ricing !ata submitte!( either actually or by s$ecific identification in writin1( to the Contractin1 fficer or the Contractin1 fficer0s re$resentative in su$$ort of !the proposal" are accurate% com#lete% an! current as of !date negotiations completed or price agreement reached".J 4,
Certification . .certified data was an Ac=uisition Streamlinin1 chan1e9 7 To reduce lead.Certification is e6$ensive for the contractor in terms of time( man$ower( and cost to assemble( $re$are( check( and $resent the certified data $acka1e.!plications for the Contractor .Administrative and le1al $roblems for contractors with certification9 7 Truth :n <e1otiations Act !T:<A" 7 /CAA $ost award audits 7 Potential defective $ricin1 44 .Em$hasis on non.times and costs to the Government D Contractors 7 Facilitate evaluations and reduce $ost award administration .
. 4' .4*.:f( after award( cost or #ricing !ata are foun! to be inaccurate% incom#lete% or non-current( as of the date of final a1reement on $rice or an earlier date a1reed u$on by the $arties 1iven on the contractor0s8subcontractor0s Certificate of Current Cost or Pricin1 /ata( 7 the Government is entitled to a $rice ad2ustment( includin1 $rofit or fee( of any si1nificant amount by which the $rice was increased because of the defective data !Clauses ').&* D ').&" .)&'. .3esolvin1 the issue may involve re$ayment of dis$uted amount $lus $enalty and interest./efective Cost or Pricin1 /ata !FA3 &'.Audit Trackin1 7 Contract Audit Follow #$ !CAF#" .&&".)&'.
Per &'.tier subcontractor also have to submit certified data 7 Aodification worth over O5'*K( of any sealed bid or ne1otiated contract !consider a solute value of both cost increases and decreases" 45 ..4*.%hresholds>A7ards Where Certified Cost or Pricing Data Are 'equired .4!a"!&"9 7 Award of any ne1otiated contract over O5'*K 7 Award of a subcontract over O5'*K at any tier( if contractor and each hi1her.
.Subcontract Cost or Pricin1 /ata FA3 &'. million or moreM or !)" -ot" more t"an t"e #ertinent cost or #ricing !ata t"res"ol! &+6./' an! more t"an 1.The contractor shall submit !or cause to be submitted by the subcontractor !s"" cost or $ricin1 data to the Government for subcontracts that are the lower of 9 !&" +11(. !& of )" .0 of t"e #rime contractor1s #ro#ose! #rice( unless the Government believes such submission is unnecessary.. 4. .4*4.
The contractor shall u$date subcontractor0s data( as a$$ro$riate( durin1 ne1otiations.The PC may re=uire the contractor or subcontractor to submit to the Government subcontractor cost or $ricin1 data below the thresholds that the PC considers necessary for ade=uately $ricin1 the $rime contract.4*4.. .The subcontractor cost or $ricin1 data shall be current( accurate( and com$lete as of the date of $rice a1reement( or( if a$$licable( an earlier date a1reed u$on by the $arties and s$ecified on the contractor0s Certificate of Current Cost or Pricin1 /ata. 4+ . !) of )" .Subcontract Cost or Pricin1 /ata FA3 &'.
FA3 &'..4!)"9 The head of the contractin1 activity( without the $ower of dele1ation( may authoriPe the PC to obtain cost or $ricin1 data for $ricin1 actions below the $ertinent threshold.Certified Cost or Pricin1 /ata for Actions #nder O5'*(*** .4*. 4B . 7 Shall 2ustify the re=uirement with written documentation and su$$ortin1 facts( that cost or $ricin1 data are necessary to determine $rice is fair and reasonable.
* adds the e6ercise of o$tions if the $rice was established at contract award or initial ne1otiation. 4 Per FA3 &'.6+(. '* .FA' )5..4*.Cost or Pricing Data 'equire!ents & ) ./9e!ptions fro! &Certifie!.&!b"( five e6em$tions9 Ade=uate $rice com$etition Prices set by law or re1ulation Commercial items @aivers !FCA a$$roval( documentation with su$$ort" 7 /FA3S9 Canadian Commercial Cor$ !CCC" D <on$rofit or1aniPations with cost reimbursement8no fee contracts ' Aodifyin1 commercial item contract or subcontract .
.6+*< .4*5.nfor!ation 1ther than Cost or Pricing Data Define! .Again% certification is t"e !ifference between t"e two categories of cost2#rice !ata3 '& . .Any ty$e of information that is not require! to be certifie! :A@ FA3 &'.FA' )5. .Such information may include $ricin1( sales( or cost information( and includes cost or $ricin1 data for which certification is determined ina$$licable after submission.) and is necessary to determine $rice reasonableness or cost realism.
6+(.:nformation ther than Cost or Pricin1 /ata( with Adequate Price Co!petition . FA' )5.Nou !ay re=uest information to determine the cost realism of com$etin1 offers or to evaluate com$etin1 a$$roaches. . ') ..f due to unusual circu!stances additional info is needed to deter!ine reasona leness? to the !a9i!u! e9tent practica le o tain it fro! sources other than the offeror.(& . .Generally( no additional info is needed( unless the $rice is unreasona le.
1. '.nfor!ationA May e 4eeded .:n 1eneral( you don0t e6$ect certified data will be re=uired( but you nee! cost information to !etermine #rice reasonableness or cost realism( . offerors may use different technical a$$roaches".Situations Where @4on. 7 Fave determined the action is below the cost or $ricin1 data threshold !O5'*(***"( but you need cost information to determine $rice reasonableness.Certified Cost . .For e6am$le( you9 7 E6$ect ade=uate $rice com$etition on a source selection but don0t e6$ect to be able to rely on com$arisons between offers to determine $rice reasonableness !e.
6+(.nstructions for Su !ission of . FA' )5.nfor!ation 1ther than Certified Cost or Pricing Data .:t may be submitted in the offeror0s own format( unless the contractin1 officer decides use of a s$ecific format is essential and the format is described in the solicitation. '4 .:f you didn0t s$ecify the info in the solicitation( you can still re=uest and obtain the needed information after initial $ro$osals are submitted. .:n the solicitation( you should s$ecify any information other than certified cost or $ricin1 data that is re=uired !Section E". .5 ..
FA' )5.:nfo other than Cost or Pricin1 /ata9 Bi!itations on Co!!ercial . '' .6+(.To the ma6imum e6tent $racticable( limit any re=uest for info to include only info that is in the form re1ularly maintained by the offeror.3e=uests for offerors0 sales data is limited to data for the same or similar items durin1 a relevant time $eriod.te!s . .(&c.
P. ) of * .%hings the Solicitation Must Specify on Cost or Pricing Data? or 4nfo 5t"er t"an Cost or *ricing Data &FA' )5.Any information other than certified cost or pricing data that is re=uired .5.@hether certified cost or $ricin1 data are re=uired .<ecessary $re.The re=uired format for the cost or $ricin1 data or information other than cost or $ricin1 data .6+(.That offerors may submit a re=uest for e6ce$tion( instead of submittin1 certified data ..award or $ost.award access to offeror0s records( if not $rovided by one of the standard clauses '5 .
)&'.6+(.)*( and ').)&'.%hings the Solicitation Must Specify on Cost or Pricing Data? or 4nfo 5t"er t"an Cost or *ricing Data &FA' )5.5.)& !mods" 7 Called out in FA3 &'.4*+!l" D !m" 7 Nou !ay use these if reasonably certain cost or $ricin1 data !or “Info Other than… !" needed 7 These cover the re=uirements and allow offerors to re=uest one of the e6ce$tions from submittin1 the data 7 :f you want s$ecific data without e6ce$tion( don0t use the standard clause '.Standard Clauses are '). P.. * of * . .
Section . 7 Field Pricin1 Su$$ort .
.4*4.Field Pricin1 Services FA3 &'. :nformation on related $ricin1 $ractices and history. :nformation to hel$ contractin1 officers determine commerciality and $rice reasonableness9 7 7 7 7 7 7 verify sales history to source documents identify s$ecial terms and conditions identify customarily 1ranted or offered discounts for the item verify the item to an e6istin1 catalo1 or $rice list verify historic data for item to =ualify as commercial identify 1eneral market conditions affectin1 determinations of commerciality and $rice reasonableness 'B - :nformation relative to the business( technical( $roduction( or other ca$abilities and $ractices of an offeror.)!a"!)" Technical( audit( and s$ecial re$orts associated with the cost elements of a $ro$osal( includin1 subcontracts.
Provide $ro$osal analysis of material( labor( indirect rates( GDA( C A( etc. ./efense Contract Aana1ement A1ency !/CAA" 7 Pricin1 and8or Technical Personnel9 $roduction s$ecialist( en1ineer( etc. .)!a"!b"!c" ./efense Contract Audit A1ency !/CAA" 7 Trained in accountin1( finance( and auditin1 7 Access to contractor accountin1 records 7 Au!itors &on-site2off-site' D Financial Advisors !FA" .Provide technical analysis and8or $ricin1 su$$ort 5* .4*4.Field Pricin1 Su$$ort FA3 &'.
Qualifications8re=uirements9 7 Formal $ro$osal re=uest 7 Formal contractor $ro$osal in a structured8auditable format 7 Ainimum ./efense Contract Audit A1ency !/CAA" ./irect labor and indirect rates w8/CAA AC as lead 7 :ncurred cost audits9 on 1oin1 .* to 4' day re=uest $rocessin1 time 5& ./CAA $rovides the followin19 7 Pro$osal audits by re=uest 7 IA1reed #$on ProceduresJ Assi1nment 7 Forward Pricin1 3ate A1reements !FP3As" .
award8$ost award 7 FA38/FA3S B..Com$ensation System 3eviews !CS3" ..ther /CAA8/CAA 3eviews .&*5 .Accountin1 system reviews 7 Pre.&*58)*B.Estimatin1 system reviews 7 /FA3S )&'. and /FA3S )44.4*.. 7 /CAA8AC function with /CAA assistance 5) .' Estimatin1 systems 7 /CAA $erforms but /CAA8AC function .Contractor Purchasin1 System 3eview !CPS3" 7 3eference FA3 44.
Technical Analysis >FA3 &'.At a minimum6 7 e7amine t"e ty#es an! quantities of material &89in!s an! quantities: e aluation' 7 an! t"e nee! for t"e ty#es an! quantities of labor "ours an! t"e labor mi7 &s9ill an! category' 5.&!e"? . . .Evaluation $erformed by $ersonnel havin1 s$ecialiPed knowled1e( skills( e6$erience( or ca$ability in en1ineerin1( science( or mana1ement on $ro$osed material ty$es and =uantities( labor( $rocesses( s$ecial toolin1( facilities( reasonableness of scra$ and s$oila1e( and other factors in the $ro$osal in order to determine the need for and reasonableness of the $ro$osed resources.4*4.
Fi6ed $rice $ro$osals e6ceedin1 O5'*K .sensitive conditions8$roblem areas 54 .lack of knowled1e of $articular contractor .)!a"9 7 PC should consider field $ricin1 su$$ort for .Cost ty$e $ro$osals e6ceedin1 O5'*K from offerors wit" significant estimatin1 system deficiencies ./FA3S )&'.Cost ty$e $ro$osals e6ceedin1 O&* million from offerors wit"out significant estimatin1 system deficiencies 7 PC should not re=uest field $ricin1 su$$ort for $ro$osals less than O5'*KM e6ce$tions9 .4*4.Field Pricin1 Su$$ort D the Cost or Pricin1 /ata Threshold .
Per FA' )5.6+6. 5' . . 7 Proposal total dollar "alue .*&a-&)-: 7 The contractin1 officer should re=uest field $ricin1 assistance when the information available at the buyin1 activity is inade=uate to determine a fair and reasonable $riceM tailor re=uests to reflect the minimum essential su$$lementary information needed to conduct a technical or cost or $ricin1 analysis.%he DCAA PBA or FA can help deter!ine the type of field pricing support>audit ser"ices needed.Consi!er cost ris93 7 Contract type9 there is more risk on a FFP than CPFF or CPAF contracts.Points to Consider @hen 3e=uestin1 Field Pricin1 Su$$ort .
) .54*.S P <umber )' 55 .3e=uest /CAA audits throu1h the FS 7 Submit audit re=uest to /CAA 7 3eceive8file /CAA audit re$orts 7 Trackin18re$ort status of /CAA audits .) 7 Contract Audit Follow #$ !CAF#" Pro1ram .B*.) .&.FS is the P C for /CAA ./o// .AFA3S '&4).&.AFA3S '&4).B*.
ncurred costs including final indirect cost rates 7 Claims 7 /efective $ricin1 reviews 7 Termination settlements 7 CAS issues8cost im$act statement reviews 5.Track8$rovide status of Ire$ortable auditsJ .3e$ortable Audits 7 Estimatin18accountin1 system and internal control reviews 7 .Contract Audit Follow #$ !CAF#" Pro1ram !& of )" . .
&st 7 Se$tember .3eviewed8u$dated9 7 Aarch .*th - vera1e Audit 3eview Board 7 /iscuss unresolved /CAA audits over 5 months old with the Commander .Contract Audit Follow #$ !CAF#" Pro1ram !) of )" .3ules8$roceduresH .Bottom Eine9 re$ortable audits must be resolved in a timely manner 5+ .3ecent revision9 /CAA database now used .
Section 6 . Cost Allowability .
Allocability .&.Factors Affecting Cost Allo7a ility !FA3 .* .)" .3easonableness .Contract Terms .Accountin1 Princi$les D Standards .)*&.
Considerations 7 :s the cost necessaryH 7 :s the cost consistent with sound business $ractice and lawH 7 Are the contractor0s $urchases done on an Iarm#s$length %asis!H ." . .'easona leness .& ..)*&.&. !FA3 .Definition9 A cost is reasonable if( in its nature and amount( it does not e6ceed what a $rudent $erson would $ay in the conduct of com$etitive business.
1. certain GDA e6$enses".A cost is Alloca le to a Government contract if9 7 :t is incurre! s$ecifically for the contract( or 7 :t benefits the contract and other work !e.( contracts" if it is char1ed based on the relative benefits received or some other e=uitable relationshi$.1. it0s an overhead cost"( and can be fairly distributed based on benefits received( or 7 :t is necessary to overall o$eration of the business !e.)*&. . !FA3 .Alloca ility .1.) . .&.Definition9 A cost is allocable to one or more cost ob2ectives !e.4" .
1. For accountin1 $ur$oses( because a future obli1ation is bein1 incurred or an asset is bein1 used.Accrue $7#ense . . For e6am$le( contractor buys inventory in advance and char1es it to contracts as inventory is used. Actual outlay of dollars !by cash( check( etc. !e.se 4n entory .$7#en! Cas" ...ncurred ." in e6chan1e for 1oods or services. .1. Pay a vendor for raw materials" .%he Most Co!!on Ways Costs are . !e. :ncurrin1 an obli1ation to current workers( for their future $ensions" .
Sources of Accounting Principles C Standards .& Contract Cost Princi$les and Procedures .FA3 Part .Generally Acce$ted Accountin1 Princi$les !GAAP" .4 .Cost Accountin1 Standards !CAS" .
Accountin19 Financial D Cost :n semi. Two ty$es9 7 <inancial accounting focuses on measurin1 the results of an or1aniPation0s o$erations for a $eriod of time( reflected in the financial statements.' .$lain En1lish9 . .Accounting is the $rocess of identification( measurement( and communication of financial information about economic entities to interested $arties. 7 Cost &or management' accounting focuses on cost allocation to a $roduct( service( or contractM mana1ement uses the information to $lan( evaluate( and control within its or1aniPation and to assure a$$ro$riate use of( and accountability for( its resources.
%he end products of the accounting cycle? the financial state!ents & alance sheet? inco!e state!ent? etc. .=enerally Acce#te! Accounting *rinci#les or =AA* refers to the common set of accountin1 conce$ts( standards( and $rocedures which re$resent a 1eneral 1uide.Generally Acce$ted Accountin1 Princi$les !GAAP" .GAAP $rinci$les are those that have substantial authoritative su$$ort or are based on accountin1 $ractices acce$ted over time by $revalent use.. 7 Financial Accountin1 Standards Board !FASB"( American :nstitute of CPAs !A:CPA"( Accountin1 Princi$les Board !APB"( etc. . .are prepared in accordance 7ith 5AAP.5 .
.Cost Accountin1 Standards !CAS" !& of )" .. :t is an attem$t to $rovide common 1round between the contractors and the federal 1overnment on cost accountin1 issues durin1 $ro$osal $re$aration( ne1otiations( etc. .Pur$ose of CAS9 7 Promul1ate standards to ac"ie e uniformity an! consistency in cost accounting #ractices to be followed by contractors and subcontractors for defense contracts.
+ . .* under the legislati"e ranch.CAS8CASB was ori1inally established in Au1ust &B.Cost Accountin1 Standards !CAS" !) of )" .Currently? there are )D standards. .Cost Accountin1 Standards Board !CASB" administers CAS9 five members( includes re$resentatives from 1overnment( industry( and academia. .*( &B+* due to lack of funds. . .Ceased o$erations Se$tember .Re-establis"e! in >o ember 1?@@ un!er t"e e7ecuti e branc" within ffice of Federal Procurement Policy ! FPP" which is under ffice of Aana1ement and Bud1et ! AB".
..%. Contracts D subcontracts with small businesses. FFP D FFP with EPA contracts8subcontracts for the ac=uisition of commercial items." below9 7 7 7 7 Seale! bi! contracts.. 7 FFP contracts D subcontracts awar!e! on t"e basis of a!equate #rice com#etition wit"out t"e submission of cost2#rice !ata( .E6em$tions From CAS !& of )" .B ..Eleven e6em$tions( with the most common !. <e1otiated contracts8subcontracts less t"an +6.
(S(% its territories% an! its #ossessions( +* .E6em$tions From CAS !) of )" 7 Contracts8subcontracts in which the $rice is set by law or regulation( 7 Contract2subcontract e7ecute! an! #erforme! outsi!e t"e .
7 <ull co erage9 com$ly with all CAS in effect on the contract award date and with any new standards.Two ty$es of CAS can be a$$licable( de$endin1 on the dollar value of $revious awards and current ac=uisitions.CAS Covera1e . .CAS 4*&( Consistency in estimatin1( accumulatin1( D re$ortin1 costs. .CAS 4*'( Accountin1 for unallowable costs.CAS 4*5( Cost accountin1 $eriod. 7 Ao!ifie! co erage9 re=uires contractor to com$ly with four standards .CAS 4*)( Consistency in allocatin1 costs incurred for the same $ur$ose. +& . .
. 7 Contractor discloses>docu!ents com$any accountin1 $ractices to the 1overnment. /isclosure Statement . +) .Firms that have contracts8subcontracts sub2ect to full CAS covera1e should have submitted a CASB /isclosure Statement( $rovidin1 information on how they char1e s$ecific ty$es of costs.CAS .& and CAS.The AC and co1niPant /CAA auditor are res$onsible for reviewin1 the contractor0s /isclosure Statement for ade=uacy( and for com$liance with FA3 Part .
+.CAS b2ectives9 7 Common cost treatment( same terminolo1y( and the avoidance of cost mani$ulation !1amin1". .CAS is an attem$t to e6tend GAAP.GAAP and CAS are not the same. CAS . . 7 Facilitate $ro$osal $re$aration and ne1otiations. .like 1uidance to 1overnment cost accountin1. .GAAP 1enerally refers to financial( not cost( accountin1 1uidance.GAAP vs.
FA' Appendi9 2 7 Contains the actual CAS +4 .FA' Part (+ 7 CAS Administration 7 Policies and Procedures for a$$lyin1 CAS to ne1otiated contracts D subcontracts .CAS: FA' 'eferences .
+' .&.FA3 . .Addresses s$ecific kinds of costs as to whether allo7a le( unallo7a le( or allo7a le 7ith restrictions.Defines direct and indirect costs. .) Cost Principles for Co!!ercial 1rganiEations .Applies to all contractors./9a!ples of unallo7a le costs: interest e6$ense( bad debts( entertainment costs( donations( attorney fees for claims. .
nterest and 1ther Financial Costs .*+ . ...FA' Part (): /9a!ples of 0nallo7a le Costs ().*+5.*+5. Contri utions or Donations ()..F .*+5.5) .( ... 2ad De ts ().)6 . Costs of Alcoholic 2e"erages +5 .*+5. /ntertain!ent Costs ().*+5.().
" 7 State C local go"ern!ents( D federally reco1niPed .& for se$arate( uni=ue covera1e of the cost $rinci$les for contracts with9 7 /ducational institutions !FA3 .&..3efer to FA3 .FA3 Part .&.ndian tri al go"ern!ents !FA3 .& Cost Principles for @1therA 1rganiEations .&..5" 7 4onprofit organiEations !FA3 ." +. .
1.1.Contract %er!s C Cost Principles .S$ecific costs may be addressed in 3FP or contract. Contract terms cannot make interest e6$ense allowable on the contract." ++ ." n cost allowability( contract terms can only be more restrictive than other factors. Althou1h trans$ortation costs are 1enerally allowable( the contract may restrict them to a certain mode. !e. !e.
Conclusion +B .
Contractors0 have to mana1e their or1aniPations( $roducts8services( and contracts .@hy notH .@hat is bein1 done to correct the situationH .Aana1ement8Cost Accountin1 System .All ma2or com$anies have such a systemR B* .There needs to be a system in $lace to determine whether the service( $roduct( or contract 7 :s on schedule for com$letion 7 :s at its bud1eted cost 7 And if not .
Ade=uate Estimatin1 System . 7 <ormally( $ro$osals from a firm with a disa$$roved system should be sub2ected to closer scrutiny( $articularly closer scrutiny by audit $rofessionals. 7 established $olicies( $rocedures( and $ractices to $ersons res$onsible for $re$arin1 and su$$ortin1 estimates . B& .AC estimatin1 system a$$roval means that the system has the controls to consistently $roduce ade=uate and reliable estimates.A disa$$roved system is a red fla1 indicatin1 that the firmSs estimatin1 system does not consistently $rovide ade=uate $ro$osals.
Pre.award accountin1 system survey $erformed by /CAA.( individual contracts( 2obs( or $roducts". System should answer affirmative to s$ecific =uestions9 7 :A@ GAAPH !:A@ CASH" 7 :dentify D se1re1ate direct from indirect costs( allocatin1 these costs e=uitably to s$ecific contracts on a consistent basisH 7 Timekee$in1 D labor distribution systems a$$ro$riately identify direct and indirect labor char1es to intermediate D final cost ob2ectivesH 7 Accumulates costs inte1rated with( and reconcilable to( the 1eneral led1erH 7 /etermine cost of work $erformed at interim $oints !at least monthly" because of routine $ostin1 to books of accountH 7 :f re=uired by the contract( identify costs by CE:<8SE:< or by unitH - S$ecifically9 Are there accountin1 IcontrolsJ in $laceH B) .e.Ade=uate Accountin1 System Primary 1oal of an acce$table accountin1 system9 7 Ensure that costs are a$$ro$riately( e=uitably( and consistently allocated to all final cost ob2ectives !i.
#nderstand the contractor0s $ro$osal.Cost Analysis Summary9 Question Checklist . . 7 3eview the $ro$osal 7 )"e #ro#osal2contractor s"oul! #ro i!e answers to t"ese questions3 @hat are the bases8rationale for the $ro$osed costsH @hat assum$tions were made and reflected in the estimate!s"H Su$$ort documentation $rovided for the $ro$osed costsH Are the costs realisticH Are the costs and8or $rice reasonableH Are all the contractor0s e6$ected costs included in his $ro$osalH Fave all the contract re=uirements been $riced into the $ro$osalH B.
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