The evaluation procedures set forth in paragraphs (a) through (c) of this section shall be utilized except where the procedures set forth in § 18-3.804-3 apply.

(a) Responsibility of contracting officer. (See § 18-3.801-2.)

(b) Technical evaluation. Generally, procurement personnel are not qualified to evaluate proposals from a technical viewpoint and must rely on scientific and engineering personnel for this function. In research and development contracting, awards should usually be made to those companies that have the highest competence in the specific field of science or technology involved, although awards should not be made on the basis of research and development capabilities that exceed those needed for the successful performance of the work. It is imperative therefore that technical evaluations and recommendations be fully documented and reviewed by responsible personnel. Technical evaluation should include the following:

(1) The contractor's understanding of the scope of the work as shown by the scientific and technical approach proposed;

(2) Availability and competence of experienced engineering, scientific, or other technical personnel;

(3) Availability of necessary research, test, and production facilities;

(4) Experience or pertinent novel ideas in the specific branch of science or technology involved;

(5) The contractor's willingness to devote his resources to the proposed work with appropriate diligence; and

(6) The contractor's proposed method of achieving the reliability required. In making this evaluation, technical personnel may be given access to portions of the business proposals upon request. After evaluation and preparation of written recommendations as to selection of source by the technical personnel, proposals shall be returned to the negotiator. The contracting officer is responsible for reviewing the justification in support of the recommendations of technical personnel to determine that the justification is adequate and that the documentation is complete.

cost analysis. Each proposal requires some form of price or cost analysis. The contracting officer must exercise judgment in determining the extent of analysis in each case. On high-dollar value procurements, particularly where effective competition has not been obtained, the analysis should be thorough, and the record carefully documented to disclose the extent to which the various elements of costs, fixed fee, or profit contained in the contractor's proposals were analyzed. The negotiation memorandum should also reflect the consideration given to the recommendations of the price analyst and the basis for nonacceptance or departure from the recommendations during the course of negotiations.

(2) Automatic data processing equipment. In evaluating proposals containing a significant amount of cost for Automatic Data Processing Equipment

(ADPE) the contracting officer should obtain from the prospective contractor a feasibility study and a lease-versuspurchase study covering the acquisition of such equipment or service. The contracting officer will obtain the recommendations of the price analyst and appropriate ADPE technical personnel as to the adequacy of the studies and the prospective contractor's determinations resulting from the studies. Particular attention should be given to those proposals containing a high dollar amount for rental of ADPE or complete systems to be used solely for performance of the contract. Current Bureau of the Budget criteria (NASA Handbook 2410.1A, "Management Procedures for Automatic Data Processing Equipment") should be used, where applicable, as a guide in evaluating the contractor's studies (also see Subpart 18-3.11). Prospective contractors should be encouraged to:

(i) Use ADPE machine time available within a reasonable geographic distance; (ii) Use tele-communications links to remote Government-owned or leased ADPE systems, and

(iii) Purchase ADPE in preference to leasing the equipment where the financial advantage is the sole or overriding factor.

(3) Other factors. The contracting officer must appraise the management capability of the offeror to perform the required work in a timely manner. In making this appraisal, he must consider such

factors as the company's management organization, past performance, reputation for reliability, availability of the required facilities, ability to control, maintain and account for any property provided by the Government, and cost controls.

[36 F.R. 21480, Nov. 10, 1971, as amended at 36 F.R. 25114, Dec. 29, 1971]

§ 18-3.804-3 Evaluation proceduresuse of Source Evaluation Board.

(a) Source Evaluation Board Procedures are appropriate for competitive negotiated procurements, except Architect-Engineer services and contracts for which the procedures have been specifically waived, then:

(1) The estimated cost of the contract will exceed $1 million;

(2) The estimated cost of the contract will not exceed $1 million, but it is likely that the source selected will receive other contracts for later phases of the same project which, cumulatively, would total more than $1 million. (Examples of this category include feasibility studies and project definition contracts under approved programs or programs for which approval will be requested.); or that

(3) A Source Selection Official determines that the use of the Source Evaluation Board procedures is desirable.

(b) The detailed procedures regarding the designation and operation of Source Evaluation Boards are set forth in NPC 402. (See NASA Management Instruction 1152.2, "Source Evaluation Board Manual".)

§ 18-3.804-4 Disclosure of information prior to selection of contractor. During the course of evaluation proceedings, whether or not a Source Evaluation Board is utilized, NASA personnel participating in any way in evaluating proposals shall not reveal any information concerning the evaluation under way to anyone who is not also participating in the same evaluation proceedings, and then only to the extent that such information is required in connection with such proceedings. When other Government or Jet Propulsion Laboratory personnel participate in evaluation proceedings, they will be instructed to observe these restrictions. Information will be provided to unsuccessful offerors in accordance with § 18-3.106-3. § 18-3.805

Conduct of negotiations.

§ 18-3.805-1 General.

(a) After evaluation of proposals, written or oral discussions shall be conducted with all responsible offerors who submit proposals within a competitive range, price and other factors considered, in accordance with § 18-3.102(a), and due attention will be given to the factors cited in § 18-3.102(b).

(b) Procurement personnel, as well as other personnel concerned with the procurement, shall insure that contract negotiations are completed expeditiously. However, all details of the negotiation must be completed before the contract is actually placed. This includes, to the extent applicable:

(1) Arrangements regarding Government-furnished property, including the contractor's responsibility for controlling, maintaining and accounting for such property;

(2) Determination that the prospective contractor is responsible, including completion of preaward surveys where required;

(3) Arrangements with other Government agencies for the use of facilities under their control;

(4) Where the contract will be administered by another Government agency, any necessary arrangements with the responsible activity of that agency;

(5) Where the contract will involve access to classified information, verification that required security clearance has been obtained;

(6) The requirement for the furnishing of data by the contractor in the performance of the contract, both for technical evaluation and for competitive reprocurement where follow-on procurement is probable, in those situations where the appropriate technical office has requested that the contracting officer obtain such data; and

(7) If the offeror's proposal contains technical data marked with a restrictive legend, whether the Government desires rights to use such data (§§ 18-3.109, 189.202-6).

(c) Whenever negotiations are conducted with more than one offeror, auction techniques are strictly prohibited. An example would be indicating to an offeror a price which must be met to obtain further consideration, or informing him that his price is not low in relation to that of another offeror. On the other hand, it is permissible to inform an

offeror that his price is considered by the Government to be too high. After receipt of proposals, no information regarding the number or identity of the offerors participating in the negotiations shall be made available to the public or to any one whose official duties do not require such knowledge (see § 18-1.1050). Whenever negotiations are conducted with several offerors, while such negotiations may be conducted successively, all offerors selected to participate in such negotiations (see paragraph (a) of this section) shall be offered an equitable opportunity to submit such price, technical, or other revisions in their proposals as may result from the negotiations. All such offerors shall be informed of the specified date (and time if desired) of the closing of negotiations and that any revisions to their proposals must be submitted by that date. All such offerors shall be informed that any revision received after such date shall be treated as a late proposal in accordance with the "Late Proposals" provisions of the request for proposals. All such offerors shall also be informed that after the specified date for the closing of negotiation no information other than notice of unacceptability of proposal, if applicable (see § 18-3.106-3), will be furnished to any offeror until award has been made.

(d) Except where cost-reimbursement type contracts are to be used (see § 183.805-2), solicitations may provide for two-step negotiation. After receipt of initial unpriced technical proposals, such proposals will be evaluated to determine those which are acceptable to the Government or which, after discussion, can be made acceptable. After necessary discussions are completed, prices will thereafter be solicited for all acceptable proposals and no award may be made until such prices have been received. Solicitations may also include a notification of the possibility that award may be made upon submission of prices without further discussion of proposals received and therefore the best possible price should be submitted initially. Unless such notification is included in the solicitation, discussions shall be conducted as provided in paragraph (a) of this section.

(e) When, during negotiations, a substantial change occurs in the Government's requirements or a decision is reached to relax, increase or otherwise modify the scope of the work or statement of requirements, such change or modification shall be made in writing as

an amendment to the request for proposal or request for quotations, and a copy shall be furnished to each prospective contractor. See § 18-3.802-4. Oral advice of change or modification may be given if (1) the changes involved are not complex in nature, (2) all prospective contractors are notified simultaneously (preferably by a meeting with the contracting officer), and (3) a record is made of the oral advice given. In such instances, however, the oral advice should be promptly followed by a written amendment verifying such oral advice previously given. The dissemination of oral advice of changes or modifications separately to each prospective offeror during individual negotiation sessions should be avoided unless preceded, accompanied, or immediately followed by a written amendment to the request for proposal or request for quotations embodying such changes or modifications. Each offeror whether notified orally or in writing shall be required to acknowledge receipt of the amendment and to state that he understands the time limit for submission of revised proposals (see § 18-3.501(b) (54)).

[36 F.R. 707, Jan. 16, 1971, as amended at 36 F.R. 25114, Dec. 29, 1971]

In selecting the contractor for a costreimbursement type contract, estimated costs of contract performance and proposed fees should not be considered as controlling, since in this type of contract advance estimates of cost may not provide valid indicators of final actual costs. There is no requirement that costreimbursement type contracts be awarded on the basis of either (a) the lowest proposed cost, (b) the lowest proposed fee, or (c) the lowest total estimated cost plus proposed fee. The award of cost-reimbursement type contracts primarily on the basis of estimated costs may encourage the submission of unrealistically low estimates and increase the likelihood of cost overruns. The cost estimate is important to determine the prospective contractor's understanding of the project and ability to organize and perform the contract. The agreed fee must be within the limits prescribed by law and appropriate to the work to be performed. Beyond this, however, the primary consideration in determining to whom the award shall be made is: Which contractor can perform the contract in

a manner most advantageous to the Government.

§ 18-3.806 Cost, profit, and price relationships.

(a) Where products are sold in the open market, costs are not necessarily the controlling factor in establishing a particular seller's price. Similarly, where competition may be ineffective or lacking, estimated costs plus estimated profit are not the only pricing criteria. In some cases, the price appropriately may represent only a part of the seller's cost and include no estimate for profit or fee, as in research and development projects where the contractor is willing to share part of the costs. In other cases, price may be controlled by competition as set forth in § 18-3.805-1. The objective of the contracting officer shall be to negotiate fair and reasonable prices in which due weight is given to all relevant factors, including those in § 18-3.102.

(b) Profit or fee is only one element of price and represents a much smaller proportion of the total price than do such other estimated elements as labor and material. While the public interest requires that excessive profits be avoided, the contracting officer should not become so preoccupied with particular elements of a contractor's estimate of cost and profit that the most important consideration, the total price itself, is distorted or diminished in its significance. Government procurement is concerned primarily with the reasonableness of the price which the Government ultimately pays, and only secondarily with the eventual cost and profit to the contractor.

§ 18-3.807 Pricing techniques. § 18-3.807-1 General.

(a) Policies. Policies set forth in this Subpart 18-3.8 may be applied in a variety of ways in the evaluation of offerors' or contractors' proposals and in the negotiation of contract prices. The following paragraphs describe the principal price and cost evaluation techniques and the circumstances under which each may be used. They are equally applicable to initial and subsequent price negotiations.

(b) Adequate price competition and catalog or market prices. For the purpose of this § 18-3.807, 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 accord

ance 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) of this subparagraph (1) (1) is satisfied. Generally, in making this judgment, the smaller the number of offerors, the greater the need for close evaluation.

(ii) If conditions (a) through (d) in subparagraph (1) (i) 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 startup or other nonrecurring expenses, have already been absorbed in connection with previous sales, thus placing 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 by the Procurement Officer or his deputy.

(iii) 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., (a) exercise of an option in a contract for which there was adequate price competition if the option price has been determined to be reasonable in accordance with § 18-1.1504 (d) and the option price is

not greater than the contract price; and (b) and item is normally procured competitively but in a particular situation only one offer 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: (i) An established catalog or market price, (ii) of commercial items, (iii) 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 (1) is regularly maintained by the manufacturer or vendor, (2) is either published or otherwise available for inspection by customers, and (3) 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 to bargain, which can be substantiated from sources independent of the manufacturer or vendor.

(b) A "commercial item" is an item, which term included both supplies and services, of a class or kind which (1) is regularly used for other than Government purposes, and (2) is sold or traded in the course of conducting normal business operations.

(c) Supplies are "sold in substantial quantities" when the facts or circumstances are sufficient to support a reasonable conclusion that the quantities regularly sold are sufficient to constitute a real commercial market for the item. Nominal quantities, such as models, specimens, samples, and prototype or experimental units, cannot be considered as meeting this requirement. Services are sold in substantial quantities if they are customarily provided by the contractor, with personnel regularly employed, and with equipment, if any is

necessary, regularly maintained, solely or principally, for the purpose of providing such services.

(d) An item is sold "to the general public" if it is sold to other than affiliates of the seller for end use by other than the Government. Items sold to affiliates of the seller and sales for end use by the Government are not sales to the general public.

A price may be considered to be "based on" established catalog or market prices of commercial items sold in substantial quantities to the general public if the item being purchased is sufficiently similar to such a commercial item to permit the difference between the prices of the items to be identified and justified without resort to cost analysis. The foregoing criteria require positive demonstration by convincing evidence to support the application of this exception. It is not enough that an item be listed in a catalog or price list, or be offered for sale to the general public, or be intended to become a commercial item, but tangible and substantial sales activity must be shown to result from such listing, offering, or intention. The listing of an item in the Federal Supply Schedules is an offer to furnish the item to Government agencies at stipulated price and delivery terms, and does not, of itself, meet the criteria for exception.

§ 18-3.807-2 Requirement for price or cost analysis.

(a) General. Some form of price or cost analysis is required in connection with every negotiated procurement action. The method and degree of analysis, however, is dependent on the facts surrounding the particular procurement and pricing situation. Cost analysis shall be performed in accordance with paragraph (c) of this section when cost or pricing data is required to be submitted under the conditions described in §183.807-3; however, the extent of the cost analysis should be that necessary to assure reasonableness of the pricing result, taking into consideration the amount of the proposed contract and the cost and time needed to accumulate the necessary data for analysis. Price analysis shall be used in all other instances to determine the reasonableness of the proposed contract price. Price analysis may also be useful in corroborating the overall reasonableness of a proposed price where