1. Contract Pricing – Certified Cost or Pricing Data
Presented By:
Tim Serfass, DCMA-AQD
February 10, 2015

2. Contract Pricing References Truth in Negotiations Act (TINA)
Definitions
Certified Cost or Pricing Data
Proposal Analysis
Certificate of Current Cost or Pricing Data
Defective Certified Cost or Pricing Data
Contract Pricing Questions
Tim Serfass )
DCMA Cost and Pricing Policy Division (DCMA-AQD) 2

3. Contract Pricing References
FAR 15.4 & DFARS Subpart 215.4, Contract Pricing
FAR & DFARS , Obtaining Certified Cost or Pricing Data
FAR & DFARS , Proposal Analysis
Contract Pricing Reference Guides (5 Volumes)
Volume 1, Price Analysis
Volume 2, Quantitative Techniques for Contract Pricing
Volume 3, Cost Analysis
Volume 4, Advanced Issues in Contract Pricing
Volume 5, Federal Contract Negotiations Techniques
DPAP Memo, Commercial Items and the Determination of Reasonableness for Commercial Items, February 4, 2015 3

4. Truth in Negotiations Act (TINA)
Truth in Negotiations Act (TINA) – Public Law (codified by 10 USC 2306a), September 10, 1962
Applies to non-competitive procurements (subject to exceptions)
Requires the contractor (and subcontractors) to submit cost or pricing data used in the preparation of the proposal
Permits the government to examine the same data used by the contractor to prior to opening negotiations
Provides the government an opportunity negotiate a fair and reasonable price
Requires the contractor, at a later date, to certify the cost or pricing data as current, accurate, and complete
TINA requirements regulated through FAR and DFARS , Obtaining certified cost or pricing data 4

5. Definitions Two key terms as define in FAR 2.101
“Cost or pricing data” (10 U.S.C. 2306a(h)(1) and 41 U.S.C. chapter 35) means all facts that, as of the date of price agreement, or, if applicable, an earlier date agreed upon between the parties that is as close as practicable to the date of agreement on price, prudent buyers and sellers would reasonably expect to affect price negotiations significantly. Cost or pricing data are factual, not judgmental; and are verifiable. While they do not indicate the accuracy of the prospective contractor’s judgment about estimated future costs or projections, they do include the data forming the basis for that judgment. Cost or pricing data are more than historical accounting data; they are all the facts that can be reasonably expected to contribute to the soundness of estimates of future costs and to the validity of determinations of costs already incurred. They also include, but are not limited to, such factors as— (1) Vendor quotations; (2) Nonrecurring costs; (3) Information on changes in production methods and in production or purchasing volume; (4) Data supporting projections of business prospects and objectives and related operations costs; (5) Unit-cost trends such as those associated with labor efficiency; (6) Make-or-buy decisions; (7) Estimated resources to attain business goals; and (8) Information on management decisions that could have a significant bearing on costs.
“Certified cost or pricing data” means “cost or pricing data” that were required to be submitted in accordance with FAR and and have been certified, or are required to be certified, in accordance with This certification states that, to the best of the person’s knowledge and belief, the cost or pricing data are accurate, complete, and current as of a date certain before contract award. Cost or pricing data are required to be certified in certain procurements (10 U.S.C. 2306a and 41 U.S.C. chapter 35). 5

6. Certified Cost or Price Data
FAR – Obtaining Certified Cost or Pricing Data
– Prohibition on Obtaining Certified Cost or Pricing Data
– Other Circumstances Where Certified Cost or Pricing Data are Not Required
– Requiring Data Other Than Certified Cost or Pricing Data
– Requiring Certified Cost or Pricing Data
– Instructions for Submission of Certified Cost or Pricing Data and Data Other Than Certified Cost or Pricing Data
Table 15-2 under FAR
DFARS Provision , Proposal Adequacy Checklist, should be included in a solicitation for the contractor to complete when the submission of certified cost or pricing are required 6

7. Certified Cost or Price Data
– Prohibition on Obtaining Certified Cost or Pricing Data
For acquisitions at or below the simplified acquisition threshold ($150K)
When an exception to certified cost or pricing data applies, which include
Adequate price competition
Prices set by law or regulation
Commercial item [Current issue in DoD*]
Waivers authorized by the head of the contracting activity (HCA)
– Requiring Certified Cost or Pricing Data
Required when the contract action amount exceeds $700,000 and none of the exceptions at FAR apply
Includes all facts that prudent buyers and sellers would reasonably expect to significantly affect price negotiations
Data are factual (not judgmental) and are verifiable
Applies to the data upon which the judgments or estimates were based
Upon agreement on price, the contractor must submit a “Certificate of Current Cost or Pricing Data”
* DPAP Memo, Commercial Items and the Determination of Reasonableness for Commercial Items, February 4, 2015 7

8. Proposal Analysis
Proposal Analysis techniques include, but not limited to, those listed and defined at FAR and DFARS
Price Analysis – Evaluation of a proposed price without evaluating its separate cost elements and proposed profit
Cost Analysis – Evaluation of the separate cost elements and proposed profit/fee
Cost Realism Analysis – Evaluation of specific elements to determine whether the estimated proposed cost elements are realistic for the work to be performed
Technical Analysis – Evaluation of type and quantities of material, labor, and other technical aspects of the proposal.
Unit Prices – Evaluation of unit prices to ensure the price reflects the intrinsic value of the item
Unbalanced Pricing – Occurs when the price of one or more contract line items is significantly over or understated as indicated by the application of cost or price analysis techniques
Price analysis and cost analysis are the primary techniques applied with the proposal analysis usually referred to as “Cost & Price Analysis” or “Price/Cost Analysis” 8

9. Proposal Analysis
Cost & Price Analysis and “Certified Cost or Pricing Data”
When Certified Cost or Pricing Data are required
“Cost Analysis” shall be used to evaluate the reasonableness of individual cost elements
“Price Analysis” should be used to verify that the overall price offered is fair and reasonable
When Certified Cost or Pricing Data are not required
“Price Analysis” shall be used
“Cost Analysis” may be used to evaluate data “other than certified cost or pricing data” to determine cost reasonableness or cost realism when a fair and reasonable price cannot be determined through price analysis alone
Cost & Price Analysis usually includes the use of technical analysis and cost realism analysis techniques in the cost element analysis 9

10. Proposal Analysis Proposed Price = Cost + Profit (or Fee) Cost Profit
(Cost Elements)
Direct Costs *
Indirect Costs **
Profit
DFARS to 73
Application of the DOD Weighted Guidelines
Direct Material
Raw Material
Purchased Parts
Subcontracts
Overhead (OH)
Material Handling
Engineering
Manufacturing
Fee
DFARS & 75
Direct Labor
Engineering
Manufacturing
General & Administrative (G&A) Expenses
Other Direct Costs (ODCs)
Travel
Tooling
Facilities Capital Cost of Money (FCCOM)
* Direct cost means any cost that is identified specifically with a particular final cost objective. Direct costs are not limited to items that are incorporated in the end product as material or labor. Costs identified specifically with a contract are direct costs of that contract . All costs identified specifically with other final cost objectives of the contractor are direct costs of those cost objectives.
** Indirect cost means any cost not directly identified with a single final cost objective, but identified with two or more final cost objectives or with at least one intermediate cost objective. 10

11. Proposal Analysis Proposal adequacy Cost analysis considerations
DFARS , Proposal Adequacy Checklist
Submission of certified cost or pricing data (FAR , Table 15-2)
Cost analysis considerations
Direct and indirect costs
Recurring or non-recurring costs
Allowability, allocability, and reasonableness of costs
Cost models, Basis of Estimate (BOE), Cost Estimating Ratios (CERs)
Contractor’s business systems (accounting, earned value Management, estimating, purchasing)
Cost Accounting Standards (CAS)
Independent government estimate
Technical review of cost elements (technical analysis)
Comparison of actual costs vs. estimated costs
Price analysis – Costs (prices) within cost elements and total price 11

12. Proposal Analysis Proposal analysis assistance
DCMA field pricing assistance
DCAA audit assistance for fixed-price proposal exceeding $10M and cost-type proposals exceeding $100M (DFARS PGI )
Evaluation of commercial (commercial of-a-type) item prices
Exempt from the requirement for certified cost or pricing data
DPAP Memo, Commercial Items & the Determination of Reasonableness for Commercial Items, February 4, 2015 – Includes proposed DFARS rule
Policy to make commercial item determinations within 10 business days
Emphasize obtaining “Other than certified cost or pricing data”
Commercial or not, “Am I (taxpayer) paying a fair and reasonable price?”
Obtain the Certification of Current Cost or Pricing Data
Document proposal analysis
Cost and Pricing Analysis Report
Pre-Negotiation Objectives Memorandum (PNOM) 12

13. Certificate of Current Cost or Price Data
FAR (b)(2) – A Certificate of Current Cost or Pricing Data, in the format specified in , certifying that to the best of its knowledge and belief, the cost or pricing data were accurate, complete, and current as of the date of agreement on price or, if applicable, an earlier date agreed upon between the parties that is as close as practicable to the date of agreement on price.
FAR – Certificate of Certified Cost or Pricing Data
The certificate does not constitute a representation as to the accuracy of the contractor’s judgment on the estimate of future costs or projections.
The contracting officer and contractor are encouraged to reach a prior agreement on criteria for establishing closing or cutoff dates when appropriate in order to minimize delays associated with proposal updates. What is significant depends upon the circumstances of each acquisition.
Possession of a Certificate of Current Cost or Pricing Data is not a substitute for examining and analyzing the contractor’s proposal.
If certified cost or pricing data are requested by the Government and submitted by an offeror, but an exception is later found to apply, the data shall not be considered certified cost or pricing data and shall not be certified in accordance with this subsection.
Certificate of Current Cost or Pricing Data
This is to certify that, to the best of my knowledge and belief, the cost or pricing data (as defined in section of the Federal Acquisition Regulation (FAR) and required under FAR subsection ) 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.
Firm ____________________________________________________
Signature ________________________________________________
Name ___________________________________________________
Title ____________________________________________________
Date of execution*** _______________________________________
* Identify the proposal, request for price adjustment, or other submission involved, giving the appropriate identifying number (e.g., RFP No.).
** Insert the day, month, and year when price negotiations were concluded and price agreement was reached or, if applicable, an earlier date agreed upon between the parties that is as close as practicable to the date of agreement on price.
*** Insert the day, month, and year of signing, which should be as close as practicable to the date when the price negotiations were concluded and the contract price was agreed to 13

14. Defective Certified Cost or Price Data
Defective Certified Cost or Pricing Data (FAR )
Certified cost or pricing data from the contractor found to be inaccurate, incomplete, or noncurrent
Contracting officer may become aware of potential defective pricing
Through a DCAA selected post award evaluations, or
As a result of a contracting officer requested DCAA audit
If discovering potential defective pricing the contracting officer shall immediately bring it to the attention of the contractor
The contracting officer may require the contractor to resubmit some data
The contracting officer may take other actions (offsets, repayments to include penalties and interest) 14

15. Contract Pricing Questions15