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ment pays and only secondarily with the eventual cost and profit to the contractor. 81-3.807 Pricing techniques. 81–3.807-1 General.

(a) Policies set forth in this Subpart 1-3.8 may be applied in a variety of ways In the evaluation of offerors' or contr actors' proposals and in the negotiation of contract prices. This $ 1-3.807 d scribes the principal price and cost e aluation techniques and the circumstances under which each may be used. They are equally applicable to initial and subsequent price negotiations.

(b) For the purpose of this § 1-3.807, the terms "adequate price competition" and "established catalog or market prices of commercial items sold in substantial quantities to the general public" shall be construed in accordance with the followIng general guidelines.

(1) Adequate price competition. (1) Price competition exists if offers are solicited and (A) at least two responsible offerors (B) who can satisfy the purchaser's (e.g., the Government's) requirements (C) Independently contend for a contract to be awarded to the responsive and responsible offeror submitting the lowest evaluated price (D) by submitting priced offers responsive to the expressed requirements of the solicitation. Whether there is price competition for a given procurement is a matter of judgment to be based on evaluation of whether each of the foregoing conditions (A) through (D) is satisfied. Generally, in making this judgment, the smaller the number of offerors, the greater the need for close evaluation.

(il) If conditions (A) through (D) In (1) above are met, price competition may be presumed to be "adequate" unless the purchaser (e.g., the contracting officer) finds that:

(A) The solicitation was made under conditions that unreasonably deny to one or more known and qualified offerors an opportunity to compete;

(B) The low competitor has such a determinative advantage over the other competitors that he is practically immune to the stimulus of competition in proposing a price (e.g., a determinative advantage because substantial costs, such as start-up or other nonrecurring expenses, have already been absorbed in connection with previous sales, thus plac

ing the competitor in a preferential position); or

(C) The lowest final price is not reasonable and supports such finding by an enumeration of the facts upon which it is based: Provided, That such finding is approved at a level above the contracting officer.

(iil) A price is "based on” adequate price competition if it results directly from such competition or, if price analysis (not cost analysis) shows clearly that the price is reasonable in comparison with current or recent prices for the same or substantially the same items procured in comparable quantities under contracts awarded as a result of adequate price competition (e.g., exercise of an option in a contract for which there was adequate price competition if the option price has been determined to be reasonable and the option price is not greater than the contract price; or an Item is normally procured competitively but in a particular situation only one other is solicited or received, and the price clearly is reasonable in comparison with recent purchases of comparable quantities for which there was adequate price competition).

(2) Established catalog or market prices of commercial items sold in substantial quantities to the general public. Application of this exception also requires judgment and analysis on a caseby-case basis. In making this judgment, the various elements of the term must be considered and a price must meet all these conditions in order to be considered for exception. In other words, the price must be, or be based on, (1) an established catalog or market price, (11) of commercial items, (ili) sold in substantial quantities, (iv) to the general public. The following criteria should be applied in determining whether an item falls within the scope of this exception:

(A) An "established catalog price” is a price included in a catalog, price list, schedule, or other form that (I) is regularly maintained by the manufacturer or vendor, (II) is either published or otherwise available for inspection by customers, and (III) states prices at which sales are currently, or were last, made to a significant number of buyers constituting the general public. An "established market price" is a current price, established in the usual and ordinary course of trade between buyers and sellers free

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190 PR. 6581, May 13, 1965, as ame

sector's cost or pricing data (see 1-3A) and of the judgmental factors mied in projecting from the data to te estimated costs, in order to form an malon on the degree to which the connelor's proposed costs represent what

performance of the contract should cost aming reasonable economy and em.

sec. It includes the appropriate verltation of cost data, the evaluation of pecific elements of costs, and the prostion of these data to determine the flect on prices of such factors as: O The necessity for certain costs;

b) The reasonableness of amounts slmated for the necessary costs;

9Allowances for contingencies;
iv
) The basis used for allocation o

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terhead costs; and

w The appropriateness of allocation dparticular overhead costs to the pro vised contract.

(2) Cost analysis shall also include ar propriate verification that the contra

ter's cost submissions are in accordan with the contract cost principles au procedures in Part 1-15. (3) Among the evaluations that shou be made where the necessary data erailable are comparisons of a contra to's or offeror's current estimated cc

(1) Actual costs previously incurred the contractor or offeror;

(W) The contractor's or offeror's prior cost estimate for the same similar item or with a series of his I

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(1) Current cost estimates from possible sources; and (lw) Prior estimates of historical of other contractors manufacturin same or similar items. (4) Forecasting future trends in from historical cost experience is a mary importance. An adequate

analysis must include considerati future trends in costs. In cases 1 lang production of recently deve symplex equipment, even in peri relative price stability, trend ana basic labor and materials costs sh

1772,5296, Maz. 14, 1972) 11-3.807-3 Cost or pricing data () The contracting officer st Dept as provided in paragraph (b testigon require the prospective

tractor's cost or pricing data (see $ 1-3.. 807–3) and of the judgmental factors applied in projecting from the data to the estimated costs, in order to form an opinion on the degree to which the contractor's proposed costs represent what performance of the contract should cost, assuming reasonable economy and efficiency. It includes the appropriate verification of cosi data, the evaluation of specific elements of costs, and the projection of these data to determine the effect on prices of such factors as:

(1) The necessity for certain costs;

(ii) The reasonableness of amounts estimated for the necessary costs;

(lli) Allowances for contingencies;

(iv) The basis used for allocation of overhead costs; and

(v) The appropriateness of allocations of particular overhead costs to the proposed contract.

(2) Cost analysis shall also include appropriate verification that the contractor's cost submissions are in accordance with the contract cost principles and procedures in Part 1-15.

(3) Among the evaluations that should be made where the necessary data are available are comparisons of a contractor's or offeror's current estimated costs with:

(1) Actual costs previously incurred by the contractor or offeror;

(11) The contractor's or offeror's last prior cost estimate for the same or a similar Item or with a series of his prior estimates;

(11) Current cost estimates from other possible sources; and

(iv) Prior estimates of historical costs of other contractors manufacturing the same or similar items.

(4) Forecasting future trends in costs from historical cost experience is of primary importance. An adequate cost analysis must include consideration of future trends in costs. In cases involving production of recently developed, complex equipment, even in periods of relative price stability, trend analysis of basic labor and materials costs should be undertaken. (30 F.R. 6581, May 13, 1965, as amended at 37 FR 5296, Mar. 14, 1972] $ 1-3.807-3 Cost or pricing data.

(a) The contracting officer shall, except as provided in paragraph (b) of this section require the prospective contrac

tor or contractor, as the case may be, to submit written cost or pricing data (see § 1–16.806 for cost or pricing data forms) or to specifically identify such data in writing is actual submission of the data is impracticable, and to certify, by the use of the certificate set forth in 813.807-4, that, to the best of his knowledge and belief, the cost or pricing data submitted or identified was accurate, complete, and current prior to:

(1) The award of any negotiated contract expected to exceed $100,000 in amount; or

(2) The pricing of any modification to any formally advertised or negotiated contract, whether or not cost or pricing data was required in connection with the Initial pricing of the contract, when the modification involves aggregate increases and/or decreases in costs, plus applicable profits, expected to exceed $100,000. For example, the requirement applies (i) to a $30,000 modification resulting from a reduction of $70,000 and an increase of $40,000, or (ii) when the modification results in no change in contract price because there is an increase of $200,000 and a reduction of $200,000. However, this requirement does not apply when unreleated and separately priced changes for which cost or pricing data would not be required are included in the same modification for administrative convenience.

(b) The requirements of paragraph (a) of this section need not be applied (1) where the contracting officer determines, in writing, that the price negotiated is based on (1) adequate price competition, (ii) established catalog or market prices of commercial items sold in substantial quantities to the general public, or (iii) prices set by law or regulation, or (2) where, in exceptional cases, the head of the agency or his authorized designee authorizes the waiver of those requirements and states in writing his reasons for such determination (see § 1-3.302(e)).

(c) The furnishing and certification of cost or pricing data shall be required prior to the award of any negotiated contract not expected to exceed $100,000 in amount, or prior to the pricing of any contract modification not expected to exceed $100,000 in amount, to any formally advertised or negotiated contract whether or not cost or pricing data was required in connection with the initial

$ 1-3.807-3

Title 41—Public Contracts, Property Management

pricing of the contract: Provided, That It is considered that the circumstances warrant such action, such as in paragraph (g) of this section. However, certification of the data shall not be required in the case of cost and cost-sharing contracts, the estimated cost of which does not exceed $100,000 and under which the contractor receives no fee.

(d) (1) Any contractor who is required to submit and certify cost or pricing data in accordance with this § 1-3.807–3 shall be required with his own submission to submit, or arrange for the submission of, accurate, complete and current cost or pricing data from his prospective subcontractors in support of each subcontract cost estimate included in the contractor's submission. This requirement is applicable whenever the contracting officer considers such subcontractor data necessary for good pricing of the prime contract, or, in any event, whenever such subcontractor cost estimate is either (i) $1,000,000 or more, or (ii) both more than $100,000 and more than 10 percent of the prime contractor's proposed contract price.. The requirement is not applicable, however, when the contractor in his submission demonstrates to the satisfaction of the contracting officer that a prospective subcontract will be based on adequate price competition, or that a prospective subcontract estimate is based on an established catalog or market price of a commercial item sold in substantial quantities to the general public, or a price set by law or regulation. Except for subcontracts within (1) or (ii) of this paragraph (d) (1), any such requirement for subcontractor cost of pricing data may be limited by the contracting officer to particular subcontract items or classes of items. However, in the case of subcontracts of $100,000 or less, any such requirement shall be subject to limitations comparable to those set forth in § 1-3.807–3(g) for contracts of $100,000 or less. Submission of subcontractor cost of pricing data from more than one subcontractor for each subcontract item shall not ordinarily be required if the contractor's subcontract cost estimate is based upon the cost or pricing data of the subcontractor who is most likely ultimately to get the subcontract. Notwithstanding the foregoing, the contractor shall remain obligated to submit other contractor data pertaining to subcontract costs, including other sub

contractor quotations, to the extent required by other provisions of this § 1-3.807–3.

(2) Prospective subcontractor cost or pricing data when required shall be accurate, complete and current as of the same date specified in the contractor's certificate. The contractor shall be responsible for updating a prospective subcontractor's data to the above date from the time or original submission by the subcontractor. Failure by the contractor to submit or procure submission of subcontract cost or pricing data as required may be cause for disqualifiation of the contractor from further consideration for award of the proposed contract. However, when the contractor has generally complied with such subcontract cost or pricing data requirements, his failure to do so for particular subcontracts in exceptional cases may be excused by the contracting officer, if the contractor in his submission demonstrates to the satisfaction of the contracting officer that he has expended his best efforts to comply in all cases but has been unable to do so because of time limitations or other circumstances beyond the control of the contractor. Such excuse, except when limited to an allowance of additional time as provided in this $ 1-3.8073(a) (2) (1), shall be approved by the head of the procuring activity or his designee. For each propective subcontract so excused, the contracting officer shall either (i) allow additional time for submission of subcontract cost or pricing data up to the date of agreement upon the prime contract price; (ii) withdraw the requirement for such subcontract cost or pricing data if he deems that cost or pricing data or other information submitted by the contractor is adequate to support the subcontract estimate; (iil) reserve such subcontract item for future pricing by reaching agreement upon the contract price subject to a contract provision calling for adjustment of the contract price within a stipulated ceiling on the basis of subcontract or other cost or pricing data required to be submitted thereafter pursuant to paragraph (d) (5) of this § 1-3.807-3 or otherwise (see § 1-3.807-10(c); (iv) consider another contract type; or (v) make other arrangements as he deems appropriate to provide an adequate basis for agreement upon contract price. Also, for each subcontract so excused, the contractor shall

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remain obligated to obtain subcontractor (2) It is the prime contractor's responcost or pricing data as provided in sibility to accomplish or cause the ac$ 1-3.807–3(d) (5).

complishment of the additional review (3) The requirements under $ 1-3.807– required and resubr.ission of the pack(d) (1) and (2), modified as appropriate age to the contracting officer. to relate to a higher tier subcontractor (3) If the prime or higher-tier subconrather than the prime contractor, shall tractor is unable to accomplish the reapply to lower tier subcontracts under quired additional analysis for justifiable subcontracts for which subcontractor reason, the Government will assist in the cost or pricing data is required by performance of the limited additional re$ 1-3.807-3(d) (1) and (2).

view required. The prime contractor (4) If the cost or pricing data re must submit in these instances conquired by paragraph (a)

of this vincing evidence to the contracting offi$ 1-3.807-3 is not adequate for the pur cer that the prime or higher-tier subpose, the contractor shall be required to contractor is unable to accomplish the support subcontract cost estimates below additional analysis either because the the minima set forth in § 1-3.807–3(d) additional review would jeopardize the (1) (i) and (ii), by any additional data subcontractor's competitive position or or information needed to establish a rea proprietary data is involved. sonable contract (not necessarily subcon (4) There may be other occasions when tract) price. In the last analysis, the a prospective prime contractor or highercontracting officer must satisfy himself tier subcontractor will request the conthat the negotiated contract price is rea tracting officer's assistance to perform or sonable. For this purpose. he should re- assist in performing a limited or comquire whatever additional contractor or plete review and evaluation of a subsubcontractor data is reasonably neces contractor's proposal, in lieu of performsary.

ing this work himself. The contracting (5) Any contractor who has been re officer should make arrangements for quired to submit and certify cost or pric such assistance only when, in his opining data in accordance with this ion, it would be in the best interests of $ 1-3.807-3 shall also be required to ob the Government to perform this contain cost or pricing data from his sub tractor responsibility. Such assistance contractors under the circumstances set should generally be provided only when: forth in the appropriate clause in (i) There is a business relationship § 1-3.814–3, notwithstanding any prior between the prime contractor and subsubmission from subcontractors pursu contractor which is not conducive to inant to this § 1-3.807-3(d).

dependence and objectivity, as in the case (6) Cost or pricing data furnished by of a parent and subsidiary, or when the a subcontractor or a prospective subcon prime and subcontracting roles of comtractor pursuant to this § 1-3.807–3 must panies are frequently reversed; or be submitted to the prime contractor or (ii) The contractor is a sole source and higher-tier subcontractor. It is the re the subcontractor costs represent a subsponsibility of the prime contractor and stantial part of the prime contractor's higher-tier subcontractor to review and costs. evaluate the subcontract proposal and (5) There may also be situations when, accompanying cost or pricing data in analyzing a contractor's proposal or and furnish the results of such re negotiating a prime contract, the conview and evaluation to the Govern tracting officer considers it necessary to ment as part of their cost or pricing data validate the prime contractor's review submission.

and evaluation of the subcontractor's (e)(1) When, in the contracting of proposal required under this $ 1-3.807– ficer's opinion, the prime or higher-tier 3(d). The purpose would be to satisfy the subcontractor's analysis of the subcon Government, not the prime contractor, tract proposal is inadequate, the con

that these elements of the prime contracting officer will return the analysis

tractor's total proposed price are reasonpackage to the prime for a re-accom able. This can be accomplished by the plishment

of

the analysis. The contracting officer requesting that a recontracting officer should indicate the view of the proposal of one or more major areas of inadequacy of review.

subcontractors be performed by cogni

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