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(5) Where a certificate of cost or pricing data is required by this § 1-3.8073(b). the applicable clause in § 1-3.814-1 shall be included in the contract, and the appropriate clauses in §§ 1-3.814-2 and 1-3.814-3 shall be used if required by those sections. Where such a certificate is required in accordance with § 1-3.8073(b) (3), those clauses shall be modified, as appropriate.

(c) Requests for proposals. Where it is reasonably expected that the requirements of § 1-3.807-3(b) for the furnishing and certification of cost or pricing data may be applicable with respect to the award or modification of a resulting

r.traci. the request for proposals shall contain the clauses required by § 1-3.807-3tb)(5> and a statement substantially as follows:

Certification Of Cost Or Pricing Data

Where a prospective contractor is required to furnish cost or pricing data In conjunction with the negotiation of a contract pursuant to this Request for Proposals, he may be required to certify, prior to contract award, that, to the best of his knowledge and belief, the cost or pricing data furnished was accurate, complete, and current as of the date b* makes the certification.

(d) Invitations for bids. Where it is reasonably expected that the requirements of § 1-3.807-3(b) for the furnishing of cost or pricing data may be applicable with respect to a change or modification to a resulting contract, the invitation for bids shall contain the clauses required by 9 l-3.807-3(b) (5).

(e) The provisions of this paragraph (e) do not apply to awards of costreimbursement type, incentive, or price redeterminable contracts. Cost data shall not be requested prior to the award of any contract anticipated to be for $2 500 or less and generally should not be requested for modifications in those amounts. In procurements where it is anticipated that the contract award or modification will be between $2,500 and $10.000, cost data generally should not be requested. In almost all awards between S2.500 and $10,000 and modifications of $10,000 or less, the administrative costs will outweigh the pricing benefits which might otherwise accrue and some form of price analysis Is almost always adequate In these situations. With respect to procurements where the amount of the award or modification is anticipated to be between $10.000 and $100,000, cost

analysis and the obtaining of cost data from contractors is discouraged; any reasonably satisfactory method of price analysis is preferred to cost analysis in situations falling within these dollar amounts.

§ 1-3.807-4 Certificate of current cost or pricing data.

When a certification of cost or pricing data is required in accordance with § 1-3.807-3, it shall be in the form set forth below and shall be included in the contract file: Certificate Of Current Cost Or Pricing Data

This is to certify that, to the best of my knowledge and belief:

(a) Complete [pricing data] [and] [cost data]* current as of have

Date

been considered in preparing the

•* and submitted in writing to the

Contracting Officer or his representative:

(b) All significant changes in the above data which occurred since the aforementioned date through *••

Date

have been similarly submitted; and no more recent significant change in such data was known to the undersigned at the time of executing this certificate; and (c) All of the data submitted are accurate.

Name

Title

Firm

(Date of execution)

Note that 18 U.S.C. 1001 prescribes criminal penalties for making false representations to the Government.

•Select one or more of the bracketed series of words, as appropriate, for submission involved.

* 'Describe the proposal, quotation, request for price adjustment, or other submission involved, giving appropriate identifying number (e.g., RFP No.).

•"This date shall be as close to the date of agreement on the negotiated price or fee as Is practicable.

§ 1-3.807-5 Defective cost or pricing data.

(a) Where any price to the Government, including profit or fee and including price adjustments, must be negotiated largely on the basis of cost or pricing data furnished by the contractor, it is essential that all data that might reasonably affect the price negotiations be disclosed and that such data be accurate, complete, and current (see § 1-3.807-3). If an agreed price includes amounts which can only be attributed to

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erroneous or Incomplete cost or pricing data, it is not a fair price and the resultant profits are not earned profits. Where negotiations are to be conducted on the basis of full disclosure, failure of one party to proceed on that basis results in something less than full mutual assent to the price negotiated so that, In this sense, the price is not fully agreed to, and fairness warrants its adjustment. The clauses set forth in § 1-3.814-1 are designed to give the Government in such a case an enforceable contract right to a price adjustment, that is, to a reduction in the price to what it demonstrably would have been if the contractor had not failed to disclose significant and reasonably available data or had not furnished inaccurate data.

(b) Under the "Price Reduction for Defective Cost or Pricing Data" clauses in 11-3.814-1, the Government's right to reduce the prime contract price extends to cases where the prime contract price was increased by any significant sums because a subcontractor furnished defective cost or pricing data in connection with a subcontract where a certificate of cost or pricing data was or should have been furnished. These clauses also provide that the prime contractor and higher tier subcontractors shall include similar clauses in certain of their subcontracts to provide them with comparable rights to price reductions. In order to secure price reductions based on defective cost or pricing data furnished by a subcontractor, however, the Government, the prime contractor, or higher tier subcontractor must be able to show that cost or pricing data furnished by subcontractors was, in fact defective. In some cases, as where the defective nature of a subcontractor's data is only disclosed by Government audit, the information necessary to support a reduction in prime contract and subcontractor prices may be available only from the Government. To the extent necessary to secure a prime contract price reduction, the contracting officer should make such necessary information available upon request to the prime contractor or higher tier subcontractors; however, if the release of such information would compromise Government security or disclose trade secrets or other confidential business information, it shall be made available only under conditions that will fully protect it from Improper disclosure. Information

made available pursuant to this paragraph shall be limited to that used as the basis for the prime contract price reduction.

(c) Inasmuch as price reductions under the Price Reduction for Defective Cost or Pricing Data clauses may involve flrs.t- and lower-tier subcontractors as well as the prime contractor, the contracting officer should give the prime contractor reasonable advance notice before making a determination to reduce the contract price under such clauses, in order to afford the prime contractor an opportunity to take any action deemed advisable by him, particularly in connection with any subcontracts that may be involved.

§ 1-3.807-6 Refusal to provide Com or pricing data.

If cost or pricing data from the contractor (or offerer) are required to permit adequate analysis of the contractor's proposal in accordance with § 1-3.807-3 and the contractor has refused to provide such data, the contracting officer shall try to persuade the contractor to furnish such data. If the contractor persists in his refusal to provide necessary data, the contracting officer shall withhold making the award or price adjustment and refer the case to higher authority within the agency. Such referral shall include a complete statement of the attempts made to resolve the matter, including (a) steps taken to secure essential cost data, (b) efforts to secure the contractor's cooperation in the establishment of a satisfactory business relationship, (c) any assurances offered, such as agreements to adequately safeguard information furnished, and (d) a statement concerning the practicability of obtaining the supplies or services from another source of supply.

§ 1-3.807-7 Unacceptable substitute* for pricing negotiations.

A certificate of cost or pricing data (see { 1-3.807-4) shall not be considered a substitute for examination and analysis of the contractor's proposal. Contracting officers shall not rely ou profit limiting statutes as remedies for ineffective pricing.

§ 1-3.807-8 Evaluation and pricing of individual contracts.

Each contract shall be priced separately and independently, and no

sideration shall be given to losses or profits realized or anticipated in the performance of other contracts. This prohibition neither prevents the negotiation of fixed overhead and other rates applicable to several contracts during mnual or other specific periods nor prohibits forward pricing agreements applicable to several contracts. A proposed price reduction under another contract or other contracts shall not be used as an evaluation factor.

S 1-3.807-9 Specified contingencies.

When a contract is to include a provision for an upward adjustment of price upon the happening of a specified contingency (e.g., escalation clauses, Government-furnished property clauses, tax clauses), the contract price should not Include any amount in anticipation of such contingency.

{ 1-3.807-10 Subcontracting consideration- in cost analysis.

(a) The amount and quality of subcontracting may be a major factor influencing price. Since a large portion of the procurement dollar is spent by prime contractors In subcontracting for work, raw materials, parts, and components, efficient purchasing practices by a contractor will contribute heavily toward efficient and economical production. While basic responsibility rests with the prime contractor for decisions to make or buy, for selection of subcontractors, uxi for subcontract prices and subcontract performance, the contracting officer must have adequate knowledge of those elements and their effect on prime contract prices. Therefore, contractors' "make-or-buy" programs and proposed subcontracts should be reviewed in accordance with Subpart 1-3.9 and the information from such review should be used in negotiating prime contract prtces. Even though not specifically required by Subpart 1-3.9, the contracting officer should, where appropriate, elicit from the offerer or contractor information concerning:

(1) His purchasing practices;

(2) The principal components to be subcontracted and the contemplated subcontractors, including (i) the degree of competition obtained, (ii) cost or price analyses or price comparisons accomplished, including accurate, complete, and current cost or pricing data, and

(iii) the extent of subcontract supervision;

(3) The types of subcontracts; i.e., firm fixed-price or other (see § 1-3.401); and

(4) The estimated total extent of subcontracting, including procurement of purchased parts and materials.

(b) In the review of subcontracting there should be assurance that the contractors obtain competition, if available, from qualified sources in their award of subcontracts to the extent consistent with the procurement of the required services or supplies. Contractors shall be required to undertake appropriate price analysis (see § 1-3.807-2 (b)) in all significant subcontract transactions, and to undertake cost analysis (see § 1-3.8072(c)) if competition is not available or does not yield reasonable subcontract prices. Where the contracting officer's consent to subcontract is required (see § 1-3.903), price or cost analysis shall be required as a condition to such consent.

(c) Where subcontracts are placed on a price redetermination or fixed-price incentive basis, it is particularly important in negotiating revisions of prime contract prices that there be substantial assurance that there was initial close pricing of subcontracts. Also, contracting officers should be alert to the risk of establishing firm redetermined prime contract prices while a major subcontract is still subject to price redetermination and may eventually be redetermined at a price far lower that that ascribed to it in redetermining the prime contract price, with consequent profits to the contractor far in excess of those contemplated in the prime contract price negotiation. However, in some cases, it may be appropriate to negotiate firm contract prices even though the contractor has not yet established final subcontract prices, if the contracting officer can justify as reasonable the amount included for subcontracting, e.g., where fairly definite cost data on subcontract prices are available. In other cases, where certain subcontracts are subject to redetermination and available cost data on these subcontracts are highly indefinite but other circumstances require prompt negotiation of revised prime contract prices the contract modification which evidences the revised contract prices should provide for adjustment of the total amount paid or to be paid under the contract on account of subsequent

Subpart 1-3.7—[Reserved] Subpart 1-3.8—Price Negotiation

Policies and Techniques § 1-3.800 Scope of subpart.

This subpart sets forth the price negotiation policies and techniques applicable to negotiated prime contracts and those subcontracts which are subject to approval or review within an agency. The principles in this subpart apply to negotiation of prices on all type of contracts and to revised prices as well as initial prices.

§ 1-3.801 Basic policy.

(a) General. It is the policy of the Government to procure property and services from responsible sources at fair and reasonable prices calculated to result in the lowest ultimate overall cost to the Government. Sound pricing depends primarily upon the exercise of sound judgment by all personnel concerned with the procurement.

(b) Responsibility of contracting officers. (1) Contracting officers, acting within the scope of their appointments (and in some cases acting through their authorized representatives) are the exclusive agents of their respective agencies to enter into and administer contracts on behalf of the Government in accordance with agency procedures. Each contracting officer is responsible for performing or having performed all administrative actions necessary for effective contracting. The contracting officer shall exercise reasonable care, skill, and judgment and shall avail himself of all of the organizational tools (such as the advice of specialists in the fields of contracting, finance, law, contract audit, engineering, traffic management, and cost analysis) necessary to accomplish the purpose as, in his discretion, will best serve the interests of the Government.

(2) To the extent services of specialists are utilized in the negotiation of contracts, the contracting officer must coordinate a team of experts, requesting advice from them, evaluating their counsel, and availing himself of their skills as much as possible. The contracting officer shall obtain simultaneous coordination of the specialist efforts to the greatest practical extent. He shall not, however, transfer his own responsibilities to them. Thus, the final negotiation

of price, including price redeterminatio and evaluation of cost estimates, re mains the responsibility of the contract ing officer.

(c) Responsibility of other personne Personnel, other than the contractin officer, who determine quality, quantit: and delivery requirements for items t be purchased, can influence the degree c competition obtainable as well as have material effect upon prices. Failure t finalize requirements in sufficient tim to allow:

(1) A reasonable period for prepara tion of requests for proposals;

(2) Preparation of quotations b offerers;

(3) Contract negotiation and prep aration; and

(4) Adequate manufacturing leai time;

causes delinquency in delivery and un economical prices. Requirements issue* on an urgent basis or with unrealistic delivery schedules should be avoidec since they generally increase price o: restrict desired competition. Personne determining requirements, specifications adequacy of sources of supply, and lik< matters have responsibility in such areas equal to that of the contracting officer for timely, sound, and economical procurement.

§ 1-3.802 Preparation for negotiation

(a) Product or service. Knowledge ol the product or service, and its use, is essential to sound pricing. Before soliciting quotations, every contracting officer should develop, where feasible, ar estimate of the proper price level 01 value of the product or service to tx purchased. Such estimates may be basec on a physical inspection of the product and review of such items as drawings specifications, job process sheets, and prior procurement data. When necessary, requirements and technical specialists should be consulted. The primary responsibility for the adequacy ol specifications and for the delivery requirements must necessarily rest with requirements and technical groups. However, the contracting officer should be aware of the effect which these factors may have on prices and competition, and should, prior to award, Inform requirements and technical groups of any unsatisfactory effect which their decisions have on prices or competition.

Cb) Selection of prospective sources. Selection of qualified sources for solicitation of proposals is basic to sound pricing. Proposals should be invited from a sufficient number of competent potential sources to insure adequate competition (see §§ 1-1.302, 1-1.310-4, 1-1.7O2. and 1-3.101). The bidders mailing lists prescribed by § 1-2.205 should be used where appropriate.

(c) Requests for proposals. Requests for proposals shall contain the information necessary to enable a prospective offerer to prepare a quotation properly. The request for proposals shall be as complete as possible with respect to: item description or statement of work; specifications; Government-furnished property, if any; required delivery schedule; and contract clauses. If a price breakdown is required, the request for proposals shall so state. Requests for proposals shall specify a date for submission of proposals; any extension of time granted to one prospective offerer shall be granted uniformly to all. Each request for proposals shall be released to all prospective offerers at the same time and no offerer shall be given the advantage of advance knowledge that proposals are to be requested. Generally, requests for proposals shall be in writing. However, in appropriate cases, such as the procurement of perishable subsistence, oral requests for quotations are authorized.

§ 1-3.8O3 Type of contract.

(a) The selection of an appropriate contract type and the negotiation of prices are related and should be considered together. Section 1-3.403 lists some of the factors for this joint consideration. The objective is to negotiate a contract type and price that includes reasonable contractor risk and provides the contractor with the greatest incentive for efficient and economical performance. When negotiations indicate the need for using other than a firm fixed price contract, there should be compatibility between the type of contract selected and the contractor's accounting system.

<b> In the course of a procurement program, a series of contracts, or a single contract running for a lengthy term, the circumstances which make for a selection of a given type of contract at the outset will frequently change so as to make a different type more appropriate

during later periods. In particular, the repetitive or unduly protracted use of cost-reimbursement type or time and materials contracts is to be avoided where experience has provided a basis for firmer pricing which will promote efficient performance and will place a more reasonable degree of risk on the contractor. Thus, in the case of a time and materials contract, continuing consideration should be given to converting to another type of contract as early in the performance period as practicable.

§ 1—3.804 Conduct of negotiations.

Evaluation of offerers' or contractors' proposals, including price revision proposals, by all personnel concerned with the procurement, as well as subsequent negotiations with the offerer or contractor, shall be completed expeditiously. Complete agreement of the parties on all basic issues shall be the objective of the contract negotiations. Oral discussions or written communications shall be conducted with offerers to the extent necessary to resolve uncertainties relating to the purchase or the price to be paid. Basic questions should not be left for later agreement during price revision or other supplemental proceedings. Cost and profit figures of one offerer or contractor shall not be revealed to other offerers or contractors.

§ 1—3.805 Selection of offerers for negotiation and award.

§ 1-3.805-1 General.

The procedures set forth in this § 1-3.805-1 are generally applicable to negotiated procurement. However, they are not applicable where their use would be inappropriate, as may be the case, for example, when procuring research and development or special services (such as architect-engineer services) or when cost-reimbursement type contracting is anticipated (see § 1-3.805-2). While the lowest price or lowest cost to the Government is properly the deciding factor in source selection in many instances, award of a contract properly may be influenced by the proposal which promises the greatest value to the Government in terms of possible performance, ultimate producibility, growth potential, and other factors.

(a) After receipt of initial proposals, written or oral discussions shall be conducted with all responsible offerers who

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