Good afternoon to our FUN with the FAR℠ Family!
As a reminder, next Wednesday, May 28th, we have our 10th episode of FUN with the FAR℠ Season 12! Our gracious host, Steve Daoust, will be joined by our expert guest speaker, Bill Walter, to cover FAR Part 15.4!
FAR Part 15.4: Contracting Pricing
As we prepare for our 10th episode of Season 12, here are a few Episode 10 FAR Facts for us to think about:
- FAR 15.4 price negotiations and procedures should be used by contracting officers to determine the
price reasonableness of modifications offered under a sealed bid contract. FAR 15.400. - As a general rule, a contracting officer will not need to obtain additional data to support the
reasonableness of a contractor’s proposed price if “adequate competition” exists in a procurement.
FAR 15.402(a)(2)(i). - The Government is not permitted to request the submission of “certified” cost or pricing data if:
- There is “adequate price competition” (FAR 15.403-1(c)(1));
- Proposed prices are set by law or regulation (FAR 15.403-1(c)(2));
- The procurement is for commercial products and commercial services (FAR 15.403-
1(c)(3); - The contracting officer has obtained a waiver of a requirement to obtain certified cost
or pricing data from the head of the contracting activity (FAR 15.403-1(c)(4); or - The value of the contract or contract modification is less than $750,000, for prime
contracts awarded before July 1, 2018, and $2 million for prime contracts awarded on or
after July 1, 2018 (FAR 15.403-4).
- The contracting officer is required to utilize “price analysis” techniques when certified cost or pricing
data is not required to be disclosed. FAR 15.404-1(a)(2). - Examples of price analysis techniques can be found at FAR 15.404-1(b)(2).
- Examples of cost analysis techniques can be found at FAR 15.404-1(c)(2).
- Prime contractors who intend to subcontract more than 70% of the total cost of work to be
performed under a contract are subject to the Limitations on Pass-Through Charges clauses set forth
at 52.215-22 or 52.215-23. Each clause requires that the prime contractor identify to the
Government the indirect cost and profit applied to the subcontracted effort and describe the value
added to the subcontracted effort by the prime to justify that indirect cost rate or profit. Any rate or
profit deemed “excessive” will be deemed unallowable under the contract. - A prime contractor is required to conduct appropriate cost or price analysis to establish
the reasonableness of proposed subcontractor pricing. FAR 15.404-3(b). - Contracting officers are required to document in the contract file the principal elements of
the negotiated agreement. The required elements that must be documented in a Price
Negotiation Memorandum are set forth at FAR 15.406-3.