Contracting Officer Podcast Slides Knowledge & Insights From Contracting Officers

What are Certified Cost and Pricing Data? Episode 062 What are Certified Cost and Pricing Data? Original Air Date: Jan 18, 2016 Hosts: Kevin Jans & Paul Schauer

Formatting notes Hyperlinks: Blue font indicates hyperlinks – presentation must be in ‘Slide Show’ mode to activate the link Red bold font indicates a point of emphasis Green bold font indicates CO’s personal comment or perspective

Introduction Purpose of this podcast: To discuss Certified Cost and Pricing Data The key word here is "Certified” Lots of things can be called cost and pricing data, but "certified" has special meaning

When do Certified Cost & Pricing Data happen? Acquisition Time Zones (from Podcast Episode 003) Requirements Zone Market Research Zone RFP Zone Source Selection Zone (or sole source) Generally during sole-source negotiations for new contracts and Engineering Change Proposals (ECPs)

What are Certified Cost & Pricing Data? Problem: We don’t have competition. How do we know this is a fair price? Solution: Certified Cost & Pricing Data, or CCPD (sort of) A promise from Industry to Government that they're being truthful regarding the costs included in a proposal or negotiation The threshold for obtaining certified cost or pricing data is $750,000

What are Certified Cost & Pricing Data? FAR 15.406-2 Certificate of Current Cost or Pricing Data (paraphrase): This is to certify that, to the best of my knowledge and belief, the cost or pricing data submitted, either actually or by specific identification in writing, to the Contracting Officer or to the Contracting Officer’s representative in support of ____* are accurate, complete, and current as of ____**. This certification includes the cost or pricing data supporting any advance agreements and forward pricing rate agreements between the offeror and the Government that are part of the proposal.

When does CCPD not apply? FAR 15.403-1 prohibits CCPD in these cases: At or below the simplified acquisition threshold ($150,000 – see Podcast 051) When the CO determines there is adequate price competition: Two or more priced offers from responsible offerors competing independently If only one offer, the CO reasonably concludes that competition was expected Price analysis clearly demonstrates the proposed price is reasonable compared to current or recent prices for the same or similar items

When does CCPD not apply? When a commercial item is being acquired (see standards in paragraph (c)(3) of this subsection); Waivers: The head of the contracting activity (HCA) may, in writing, without power of delegation, waive the requirement for submission of CCPD in exceptional cases. For example, if CCPD were furnished on previous production buys and the CO determines such data are sufficient, when combined with updated data, a waiver may be granted.

When does CCPD not apply? If the HCA approves the waiver, it also applies to the higher-tier subcontractor However…. Award of any lower-tier subcontract expected to exceed the certified cost or pricing data threshold requires the submission of cost or pricing data, Unless the waiver specifically includes that subcontract and the rationale supporting the waiver for that subcontract

When does CCPD not apply? 15.403-2 -- Other Circumstances Where Certified Cost or Pricing Data are Not Required. Option exercised with established options prices (b) Proposals used solely for overrun funding or interim billing price adjustments.

So, when does CCPD apply? 15.403-4 -- Requiring Certified Cost or Pricing Data (1) The CO shall obtain CCPD only if they determine that none of the exceptions in 15.403-1(b) apply, However, if the CO has reason to believe exception circumstances exist and has sufficient data available to determine a fair and reasonable price, Then the CO should consider requesting a waiver (under 15.403-1(b)(4)). Unless an exception applies, certified cost or pricing data are required

So, when does CCPD apply? 15.403-4 -- Requiring Certified Cost or Pricing Data (a) (2) Unless prohibited because an exception at 15.403-1(b) applies, The HCA, without power of delegation, May authorize the CO to obtain certified cost or pricing data for pricing actions below the pertinent threshold in paragraph (a)(1) of this subsection, Provided the action exceeds the simplified acquisition threshold. The HCA shall justify the requirement for certified cost or pricing data Including a written finding that certified cost or pricing data are necessary to determine whether the price is fair and reasonable

So, when does CCPD apply? 15.403-4 -- Requiring Certified Cost or Pricing Data (b) When CCPD are required, the contractor and subcontractors submit the following in support of any proposal: (1) The CCPD and other than CCPD required by the CO to determine that the price is fair and reasonable (2) A Certificate of Current Cost or Pricing Data, (from FAR 15.406-2) to show it’s accurate, complete, and current

FAR 15.406-2 – More Facts to Consider Does not apply to estimates of future costs or projections It applies to the data upon which the judgment or estimate was based Distinction between fact (quotes) and judgment (future price estimates) If the contractor had information showing that the negotiated price was not based on accurate, complete, and current data, Contractor’s responsibility not limited by lack of personal knowledge Saying “I didn’t know…” is not an answer Certificate of Current CPD: not a substitute for analyzing the proposal

FAR 15.407-1(b) – Defective Certified Cost or Pricing Data If, after award, CCPD are found to be inaccurate, incomplete, or noncurrent: Government is entitled to a price adjustment, Including profit or fee, of any significant amount by which the price was increased because of the defective data In addition to the price adjustment: Government is entitled to recovery of any overpayment plus interest on the overpayments and penalty amounts on certain of these overpayments

FAR 15.407-1(b) – Defective Certified Cost or Pricing Data However, per para (iii) ”before taking any contractual actions concerning penalties, the contracting officer shall obtain the advice of counsel.” For details on how to determine the overpayment, see 15.407-1(b)(7)(ii) Also: FAR 52.215-10 -- Price Reduction for Defective Certified Cost or Pricing Data. FAR 52.215-11 -- Price Reduction for Defective Certified Cost or Pricing Data – Modifications.

Why is CCPD Important? Great way to ‘catch’ the contractor That’s a TERRIBLE reason!!! Part of the process (and can prolong the completion of the final award) Usually painful: Government doesn’t want it to happen (like Ratifications) This type of "promise" doesn't exist in the commercial world Government can increase schedule and cost by needlessly requiring Certificate Contractors can have contingent liabilities resulting from defective Certificates

Why Should Government Care? “Open kimono” pricing Without ANY competition or context for pricing, it may be your only option In that case, it’s REQUIRED (although reluctantly) With great power, comes great responsibility The effort to certify “rolls up” the costs into overhead This may be a foreign concept to new contractors and Small Businesses Don’t take it lightly - The contractors don’t.

Why Should Industry Care? Don’t get caught flat-footed when you have to certify Don’t get caught certifying inaccurate stuff If you target sole-source contracts, this is (or can be) a cost of doing business Sole-source contracts can be a big carrot But defective pricing can have a big stick You have a compliant accounting system, right?

Summary Government team: Don’t take this lightly It’s just a ‘cert,’ BUT it includes a lot of weight (and costs) for industry Yet another reason to love competition Industry team: Be ready to stand by it Don’t rush Remember, you have to pay it back if you screw it up

Contact us We are on LinkedIn, Twitter and Facebook We also started the Government Contracting Network Group on Facebook. Join us there! Send your topics to paul@Contractingofficerpodcast.com For Community support, contact Shelley Hall at shelley.hall@skywayacquisition.com