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Sep 16, 2022 426 likes •577 views

The Aerospace & Defense Forum San Fernando Valley Chapter February 19, 2019 COST & PRICE ANALYSIS IN SOURCE SELECTION THE TOTAL EVALUATED PRICE Presented by: Scott Koslow Vice President Valkyrie Enterprises Date: February 19, 2019

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The Aerospace & Defense Forum San Fernando Valley Chapter February 19, 2019 1

COST & PRICE ANALYSIS IN SOURCE SELECTION THE TOTAL EVALUATED PRICE

Presented by: Scott Koslow Vice President Valkyrie Enterprises Date: February 19, 2019

Government pricing

  • bjective

01

  • The total

evaluated price

02

  • Best value

continuum

03

  • Cost/price

evaluation considerations

04

  • GAO Protest

05

1 2

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The Aerospace & Defense Forum San Fernando Valley Chapter February 19, 2019 2

GOVERNMENT’S PRICING OBJECTIVE (FAR 15.402)

 Obtain a “Fair & Reasonable” Price  Fair to whom?  What is standard for reasonableness?  CO must make determination for all contract

awards

 Great discretion and judgement is granted to

CO

 Government’s Pricing Objective (FAR 15.402)

TOTAL EVALUATED PRICE (TEP)

 Represents the most likely total cost/price

to the Government

 Most probable total contract cost/price  Plus other Government costs, e.g.  Transportation cost for FOB Origin  Ownership / life cycle costs  Plus adjustments to implement

procurement preference programs

3 4

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The Aerospace & Defense Forum San Fernando Valley Chapter February 19, 2019 3

TEP (CONT.)

 Sometimes easy to determine  A single firm fixed price line item  Determining TEP can be complex  Cost plus incentive fee (CPIF) development  Fixed price incentive fee (FPIF) initial

production quantities

 Variable quantity and service options  Indefinite Delivery / Indefinite Quantity

(ID/IQ) firm fixed price (FFP) spare parts

SOLICITATION REQUIREMENTS

 Describe how TEP is calculated  Describe information to be submitted by

  • fferors

 Policy: No info from offeror if adequate price

competition (FAR 15.402(a)(2)(i)) but…

 How cost/price will be considered in award

decision

5 6

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The Aerospace & Defense Forum San Fernando Valley Chapter February 19, 2019 4

BEST VALUE CONTINUUM

Best value continuum Low Price Technically Acceptable (LPTA) Price Performance Tradeoff (PPT) Other Tradeoff Methods * US Government acquisition law requires that cost/price be evaluated in every source selection (FAR 15.304(c)(1))

Non-Cost Evaluation Factors Cost or Price Evaluation Factor Per FAR 15.304(e): Non-cost factors are: ฀Significantly more important than cost or price, ฀Approximately equal to cost or price, or ฀Significantly less important than cost or price

Technical Past Performance SmallBusiness Cost or Price

SOURCE SELECTION EVALUATION FACTORS

7 8

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The Aerospace & Defense Forum San Fernando Valley Chapter February 19, 2019 5

EVALUATION CONSIDERATIONS MAKING ADJUSTMENTS TO THE TEP

REASONABLENESS

 Typically the concern is that price

may be too high (overstated)

 More likely to occur when

competition is inadequate

 Only 1, or limited number, of

capable sources

 Unusual competitive

advantage/market dominance

 Vendor collusion or price fixing

(illegal)  Adequate competition generally

assures reasonableness 9 10

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The Aerospace & Defense Forum San Fernando Valley Chapter February 19, 2019 6

REASONABLENESS TYPICALLY ASSESSED BY PRICE ANALYSIS

Comparison of proposed prices in response to solicitation*

  • Comparison with

historical prices paid*

  • Parametric cost

estimates

  • Published price lists
  • Established market

prices

  • Comparison with

independent Government cost estimate

COST REALISM ANALYSIS (FAR 15.404-1(D))

Evaluating specific elements of cost to determine whether: Estimates are realistic for the work to be performed Reflect a clear understanding of government requirements Consistent with offerors technical proposal (methods of performance/materials) Shall be performed for cost-type contracts

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The Aerospace & Defense Forum San Fernando Valley Chapter February 19, 2019 7

COST REALISM ANALYSIS (CONT.)

 Typically the concern is that costs

are too low (understated)

 Government estimate of most

probable cost—what it will cost

 TEP is adjusted by estimated

additions or reductions to cost or fee

COST REALISM ANALYSIS (CONT.)

 May, in unusual circumstances, be

used for fixed price contracts

 New requirements may not be fully

understood

 Significant quality concerns  Previous quality or service shortfalls

 Result only impacts performance

risk assessment/responsibility determination 13 14

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The Aerospace & Defense Forum San Fernando Valley Chapter February 19, 2019 8

OPTIONS

Unpriced or unevaluated options not valid (FAR 17.206(a))

May not be exercised without Additional competition or Justification for other than full and open competition and Appropriate cost/price analysis

Option prices must be part of TEP

BEST ESTIMATED QUANTITY (BEQ)

 Flexible ordering contracts often

use BEQ to calculate TEP

 Represents most likely quantity

supplies and services to be ordered

 Can also evaluate based on the

maximum orderable quantities 15 16

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The Aerospace & Defense Forum San Fernando Valley Chapter February 19, 2019 9

BALANCED PRICING

  • Variable quantity pricing (when BEQ

used)

  • Alternative option line items

TEP may not include all priced items

  • Determine whether any individual items

are significantly over or understated

  • Price analysis methods are used

Variability between prices can be assessed for overall balance

BALANCED PRICING (CONT.)

Alternatively, despite an acceptable TEP, balance may still be an issue

  • Option prices significantly higher than

basic

  • “Front-loading” of costs
  • Gaming of potential scenario
  • utcomes

Offeror may be challenged to support prices which appear unbalanced May be excluded from competitive range

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The Aerospace & Defense Forum San Fernando Valley Chapter February 19, 2019 10

OTHER GOVERNMENT COSTS

  • Gov’t pays, evaluate cost differences

FOB origin transportation costs

  • If specified in RFP, may add estimate of estimated support costs to the

TEP

  • System reliability and cost to repair
  • Fuel efficiency of alternative vehicle designs
  • Other variable ownership costs
  • Ownership

costs

PAYMENT TERMS

 Not considered in making award

decision

 Incorporate discounts into the

contract (e.g., 10% - 20 days)

 Does not adjust TEP for potential

savings 19 20

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The Aerospace & Defense Forum San Fernando Valley Chapter February 19, 2019 11

 Added to low offeror’s TEP if they are

not a preferred source

 Buy American Act (6 or 12%) (FAR

25.105)

 HUB Zone Small Business (10%)

(FAR 19.1307)

 Local sources for disaster and

emergenc

PROCUREMENT PREFERENCE PROGRAM ADJUSTMENTS

MAKING THE AWARD DECISION

Resolve any issues or concerns through discussions, if held

Resolve

Evaluate offers at the TEP amount

Evaluate

Award the successful offer at the proposed price

Award

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The Aerospace & Defense Forum San Fernando Valley Chapter February 19, 2019 12

GAO PROTEST

AVOIDING PROTEST

Market research, understanding the customer. Do what the Section L States! Understand how you are being evaluated Section M! If you do not ask questions during the proposal phase, silence is consent.

  • Ask questions!

If you low ball the price and win, the award notice may be the best and worst day for your business!

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The Aerospace & Defense Forum San Fernando Valley Chapter February 19, 2019 13

Questions?

25