# DLAD PART 15

- SUBPART 15.1 – SOURCE SELECTION PROCESSES AND TECHNIQUES

- 15.101-90 Phased competition

- SUBPART 15.2 - SOLICITATION AND RECEIPT OF PROPOSALS AND INFORMATION

- 15.201 Exchanges with industry before receipt of proposals.
- 15.204 Contract format.

- 15.204-2 Part I--The Schedule.
- 15.204-3 Part II--Contract Clauses.
- 15.204-4(91) List of Documents, Exhibits, and Other Attachments.
- 15.204-5 Part IV Representations and Instructions.
- 15.204-5 (90)

- 15.209 Solicitation Provision and Contract Clauses

- SUBPART 15.3 - SOURCE SELECTION

- 15.301 Definitions.
- 15.303 Responsibilities.
- 15.304 Evaluation factors and significant subfactors.

- 15.304-90 Automated best value system.
- 15.304-91

- 15.305 Proposal Evaluation.
- 15.308 Source Selection Decision

- 15.308-93
- 15.308-94

- SUBPART 15.4 – CONTRACT PRICING

- 15.401 Definitions.
- 15.402 Pricing policy.

- 15.402-90 Pricing policy – exclusive dealers
- 15.402-91 Pricing Policy - EMall

- 15.403 Obtaining cost or pricing data.

- 15.403-1 Prohibition on obtaining cost or pricing data (10 U.S.C. 2306a and 41 U.S.C. 254b).
- 15.403-3 Requiring information other than cost or pricing data.
- 15.403-4 Requiring cost or pricing data (10 U.S.C. 2306a and 41 U.S.C. 254b).
- 15.403-4(b)(91) Cost or pricing data for indefinite quantity and requirements contracts.
- 15.403-5 Instructions for Submission of Cost or Pricing Data or Information Other Than Cost or Pricing Data.

- 15.404 Proposal analysis.

- 15.404-1 Proposal analysis techniques.
- 15.404-2 Information to support proposal analysis.
- 15.404-4 Profit.
- 15.404-73 Alternate structured approaches.
- 15.404-71-4 Facilities capital employed.

- 15.405 Price negotiation
- 15.406 Documentation

- 15.406-1 Prenegotiation objectives.
- 15.406-3 Documenting the negotiation.

- 15.407 Special cost or pricing areas.

- 15.407-1 Defective cost or pricing data.
- 15.407-5 Estimating systems.

- 15.408 Solicitation provisions and contract clauses.

- 15.408-90

PART 15

CONTRACTING BY NEGOTIATION

TABLE OF CONTENTS

SUBPART 15.1 – SOURCE SELECTION PROCESSES AND TECHNIQUES

15.101-90 Phased competition.

SUBPART 15.2 - SOLICITATION AND RECEIPT OF PROPOSALS AND INFORMATION

15.201 Exchanges with industry before receipt of proposals.

15.204 Contract format.

15.204-2 Part I - The Schedule.

15.204-3 Part II – Contract Clauses.

15.204-5 Part IV – Representations and instructions

15.209 Solicitation Provision and Contract Clauses

SUBPART 15.3 - SOURCE SELECTION

15.301 Definitions.

15.303 Responsibilities.

15.304 Evaluation factors and significant subfactors.

15.304-90 Automated best value system.

15.305 Proposal evaluation

15.308 Source Selection Decision

SUBPART 15.4 – CONTRACT PRICING

15.401 Definitions.

15.402 Pricing policy
15.402-90 Pricing Policy – exclusive dealers

15.402-91 Pricing Policy Emall

15.403 Obtaining cost or pricing data.

15.403-1 Prohibition on obtaining cost or pricing data.

15.403-4 Requiring cost or pricing data.

15.403-5 Instructions for submission of cost or pricing data or

information other than cost or pricing data.

15.404 Proposal analysis.

15.404-1 Proposal analysis techniques.

> 15.404-2 Information to support proposal analysis.

15.404-4 Profit.

15.405 Price negotiation.

15.406 Documentation.

15.406-1 Prenegotiation objectives.

> 15.406-3 Documenting the negotiation.

15.407 Special cost or pricing areas.

15.407-1 Defective cost or pricing data.

15.408 Solicitation provisions and contract clauses.

15.408-90

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SUBPART 15.1 – SOURCE SELECTION PROCESSES AND TECHNIQUES

> 15.101-90 Phased competition

> (a) Definition - Phased competition is a risk reduction strategy that provides for the development of business approaches, systems development, etc. under contract with subsequent down-select competitions among contractors for further development or full performance within the same contract.

> (b) Application - Phased competition procedures may be appropriate when state of the art solutions are sought and significant development work is required by industry. The Government must first explore existing commercial methods and determine whether commercial solutions are available or can be readily adapted to the Government problem or requirement. Where a best commercial alternative is not apparent, or where limited development and adaptation are required, early industry involvement in exploring solutions can be elicited in the presolicitation stage through several alternative approaches addressed in DLAD sections 15.201 and 35.016. However, when state of the art solutions are sought and significant development work is required by industry, reliance on either a single Government solution or an untested commercial solution increases risk for both parties. The risk for industry is that the cost of development work required to submit a proposal will not be recouped if the proposal is not accepted. Such risk reduces industry’s interest and willingness to offer innovative solutions. The risk for the Government is that the proposed approach will not meet the Government’s requirements or provide the optimal solution. Risk can be reduced for both parties if development and testing are accomplished under contract through the use of a phased competition. While this is the classic method used to acquire major systems, it is also an appropriate method for business practice reengineering where state of the art solutions are being sought. Before using a phased competition, the Government must carefully weigh the costs and benefits inherent in this approach.

> (c) The Statement of work (SOW). Either a general statement of need or a SOW as described below may be used for the first phase of a phased competition. This is in consonance with the order of precedence established in FAR Subpart 11.1. A SOW that engages industry participation would have the following features:

> (1) It addresses the current state of operations and provides insight into future operating conditions;

> (2) It defines the desired business process future state in terms of the goals of the reengineering effort, and;

> (3) It limits specific requirements to essential Government needs, such as systems interface requirements, etc., that must be met in the reengineered business process.

> The solicitation allows offerors the freedom to propose solutions to the Government and to describe how the proposal will meet the goals of the reengineering effort. Meaningful industry dialog can help the Government to further refine both the solicitation process and the SOW.

> (d) SOW for subsequent phases. Solicitations should describe the content and format for deliverables at each phase of the competition. When this procedure is followed, the contractor’s proposed approach, a deliverable which may require revision during negotiations, becomes the SOW for the subsequent phase. Task orders should incorporate the contractor’s proposal by reference to prevent the disclosure of the contractor’s strategy to competitors.

> (e) Pricing of phases. Because of the evolutionary nature of this process, the Government cannot reasonably expect industry to price each phase of development, testing, and/or implementation as of the closing date of the solicitation. Price proposals for phases beyond the initial priced phase can be obtained as deliverables under each subsequent phase of the contract when requirements for each subsequent phases are more fully defined. Under these circumstances, the SOW for the first phase should include a requirement for deliverables, such as the statement of work for contractor-proposed tasks for the second phase, and the prices proposed to accomplish this work. This procedure can be repeated in subsequent phases, as necessary.

> (f) Competition. A phased competition is full and open competition where all responsible sources are afforded the opportunity to compete for the initial contract award. The competition includes the evaluation of written proposals for the first phase, and continues as the Government evaluates deliverables and performance during the subsequent phase(s). No justification and approval is required to issue task orders to continue performance in subsequent phases of a phased competition when the phases were included in the synopsis and the solicitation clearly describes the phased approach contemplated.

> (g) Source selection through phased competition.

> (1) During early industry involvement in this process, the Government may propose phases or work with industry to define the phases that will be used to develop, test, and implement contractual solutions for reengineering processes. Examples of phases that might be used are: concept development, proof of concept, and full implementation or production. During the first phase, the primary goal of the source selection should be to select capable contractors that have a sound understanding of the goals of the acquisition and a reasonable approach. Source selection should also consider the degree of difference in competing proposals to ensure the Government does not pay for duplicate development and testing. In the final phase, evaluation criteria should ensure that the prospective contractor(s) have sufficient background and resources to carry their proposed concept through to fruition.

> (2) The SOWs for phases beyond the first phase will develop and evolve through the phased competition process. For this reason, the solicitation should generally request proposals only for the first phase. While the solicitation must include the criteria that will be used to evaluate performance and/or deliverables in each phase, the evaluation criteria for subsequent phases can be described only in general terms initially in the solicitation. However, definitized evaluation criteria must be developed and incorporated into the contract(s) before performance in the next phase is ordered. The same evaluation criteria must apply to all contractors.

> (3) Contractors may be asked at any phase to recommend additional evaluation criteria for subsequent phases. However, the same evaluation factors must apply to all contractors involved in a particular phase. When contract proposals differ greatly in their approach, the evaluation factors should allow evaluation of deliverables and performance in terms of the reengineering goals. This method affords the Government the flexibility to make a comparative assessment of different solutions. If evaluation criteria based on contractor suggestions are used, Government personnel must carefully review these factors before including them to ensure their applicability to all potential solutions, and that the use of these factors would not result in favoring one contractor over another. Evaluation factors should be discerning and should elicit information that will allow the evaluators to qualitatively distinguish differences in proposals.

> (4) The solicitation must clearly describe how the Government will conduct the procurement. The following types of statements must be included in a description of the procedures:

> (i) The procurement uses a phased competitive approach in which the Government will evaluate deliverables and performance at the completion of each phase to determine which contractor(s) will be selected to continue into the subsequent phase(s);

> (ii) Only contractors participating in the immediately preceding phase will be considered for participation in the next phase;

> (iii) The Government intends for performance under full implementation or production to be performed by a contractor or contractors who have tested and developed their services/products under all previous phases of competition. Offerors selected must have sound concepts and the resources and background to carry this competition through to fruition;

> (iv) The Government reserves the right to make one or more awards as a result of the solicitation, and award to other than the lowest priced offeror after assessment of each offeror’s technical and business proposal. The contract should also include the appropriate clauses and provisions regarding task and delivery order procedures under FAR Subpart 16.5; and,

> (v) The Government reserves the right to discontinue performance at any phase of the competition.

> (5) Normally, multiple awards are made for the initial phase with competitive down- selections in subsequent phases to determine the most promising contractor(s). However, if it is determined that only one of the proposals received is promising, the resulting contract should continue to allow Government evaluation of development and testing for each phase in the Government environment to manage the risk associated with a single strategy.

> (h) Notification and debriefing of unsuccessful offerors/contractors. Care must be taken during debriefings to ensure no data is released that would affect the ongoing competition. The names of contractors selected should be fully disclosed at the time the initial award is made and later when subsequent orders are placed. Contractors shall be afforded the opportunity for a debriefing whenever they are eliminated from further participation in the contract. Adequate safeguards must be in place throughout all phases to protect proprietary information, trade secrets, or business confidential information, such as deliverables that will be evaluated to determine which contractor(s) will be selected to perform in subsequent phases.

> (i) Contract award. The scope of each contract awarded includes the potential for orders for all phases of contract performance. Task orders will be placed for work to be performed in each phase and this contract will be used, while the contractor remains in the competition, to move through each phase of contract performance.

> (j) Cost or pricing data. Normally, cost or pricing data should not be requested in the initial phase of a phased competition, or when more than one contractor will participate in any subsequent phase. It may be appropriate to request information other than cost or pricing data (See FAR 15.403 for additional guidance), however, especially when contractor concepts differ greatly in their approach.

> (k) Options. The contract may include horizontal options for additional periods of performance or vertical options for additional quantities during any single phase. For example, the Government may wish to include an option in the solicitation to test solutions at more than one site. Another example would be an option for additional years of performance by the selected contractor(s).

> (l) Communications/dialog with contractors. During contract performance, the timely and accurate exchange of appropriate information between the Government and participating contractor(s) is essential. Information must be shared in a manner that precludes preferential treatment throughout all phases.

> (m) Type of contract. Both offerors and the contractors selected should be allowed the flexibility in their proposals to suggest the type of contract for each phase. The Government evaluation of proposals should include a review of the type of contract proposed in consonance with the approach proposed, and how the contract type fits with program goals when establishing negotiation objectives. Contract type may differ in each phase, resulting in a hybrid contract.

SUBPART 15.2 - SOLICITATION AND RECEIPT OF PROPOSALS AND INFORMATION

15.201 Exchanges with industry before receipt of proposals.

(b) Early exchanges with industry, an essential part of the procurement process, are used to elicit industry participation in the planning and execution of the acquisition, especially when seeking to re-engineer business processes. The acquisition team (for example: program manager, contracting officer, technical support, requirements personnel, and customer representatives) should tailor the nature and extent of the techniques used to each acquisition. Early exchanges with industry can also facilitate the following objectives:

> (i) Overcome barriers to acquiring commercial items and technologies and emulating commercial business practices;

(ii) Develop more effective acquisition strategies and procurements tailored to elicit the best commercial solutions available;

(iii) Emulate commercial manufacturing, distribution, and inventory management techniques (e.g., manufacturing on demand, direct vendor delivery, electronic tracking of inventory, and the electronic commercial catalogue);

(iv) Create new buyer-seller relationships that reduce suppliers’ dependence on defense business and facilitate integration of defense and commercial industrial bases (e.g., teaming arrangements, dual-use technologies, and shared production agreements with suppliers); and

(v) Make available a defense mobilization base capable of responding to peacetime supply requirements and in time of emergencies.

(c)(3) Sources sought announcements and letters to known potential sources are effective market research methods to identify interested suppliers and available products and capabilities.

(c)(6) Draft requests for proposals (DRFP's) provide industry an opportunity to comment on any aspect of the proposed acquisition prior to issuing a solicitation. It is appropriate to use DRFP's whenever, in the contracting officer's judgment, the acquisition will benefit significantly from early industry involvement. DRFPs are an effective means to resolve potential contract issues and obtain feedback from prospective offerors. Such information can lead to significant cost savings and productivity enhancements; reduce proposal preparation and evaluation time; reduce the need for solicitation amendments and preclude other delays that disrupt timely completion of the acquisition; and result in better proposals, end products, and services. The use of DRFPs can encourage potential sources to provide valuable comments on such matters as:

(A) Proposed customer requirements, including identification of requirements that are "cost drivers;"

(B) Proposed acquisition and evaluation strategy, including business and technical approaches;

(C) Contract methodology, including how best to elicit proposals based on current and emerging commercial practices, and contract type;

(D) Methods to reduce proposal and contract costs and explore technology advancements and contract incentives; and

(E) Revisions to performance, schedule, or other contractual requirements.

The contracting officer should publicize the DRFP using a variety of methods, such as CBD announcements and those methods addressed at 15.201(c) and FAR 5.101(b). The publication and response times for proposed contract actions at FAR 5.203 are not mandatory for DRFPs. The contracting officer should establish reasonable times for receipt of responses to DRFPs that reflect the nature of the product or service, the supply base, and the specifics of the individual procurement. Requirements shall be synopsized in accordance with FAR 5.203 prior to issuing the solicitation. Alternatively, notice of the availability of the DRFP and a future date when the solicitation will be issued may be included in the same synopsis.

(d) Preproposal Conferences. If a preproposal conference is planned, insert the provision at DLAD 52.215-9007 Preproposal Conference. If the contracting officer determines that additional publicity is in the best interests of the Government, a special notice on the Government Point of Entry at http://www.fedbizopps.gov may also be used as provided by FAR 5.205(c).

15.204 Contract format.

15.204-2 Part I--The Schedule.

(a) Section B Supplies or services and prices/costs. Guidance at 14.201-2(b)(90) also applies to Request for Proposals (RFPs) and Request for Quotations (RFQs).

(90) Guidance at 14.201-2(b)(90) also applies to Requests for Proposals (RFPs) and Requests for Quotations (RFQs).

(91) When clause 52.216-9000 (or substantially the same clause) is used with FAR clause 52.216-2, include a note in Section B that essentially states ”as stated in FAR clause 52.216-2, the price the offeror is to record in the Schedule in submitting its offer shall instead be recorded in clause 52.216-9000 (See Section I).”

(92) When clause 52.216-9001 (or substantially the same clause) is used with FAR clause 52.216-3, include a note in Section B that essentially states ”as stated in FAR clause 52.216-3, the price the offeror is to record in the Schedule in submitting its offer shall instead be recorded in clause 52.216-9001 (See Section I).”

(c) Section C, Description/specifications/statement of work. Clearly stamp or otherwise indicate “Foreign Military Sales (FMS) Requirements” on the face of each negotiated contract which includes FMS requirements.

15.204-3 Part II--Contract Clauses.

Section I, Contract clauses. The contracting officer shall insert the clause at 52.214-9004, Subcontracting to other industrial preparedness planned producers, in solicitations and contracts whenever contracting without providing for full and open competition under authority of FAR 6.302-3. 10 U.S.C. 2304(c)(3).

15.204-4(91) List of Documents, Exhibits, and Other Attachments.

Use 52.215-9017, List of Documents, Exhibits, and Other Attachments, in solicitations/ awards when a list of documents, exhibits, and other attachments that comprise the solicitation/award package is required. The Contracting Officer will identify the form number, title, date, and number of pages in each document.

15.204-5 Part IV Representations and Instructions.

15.204-5 (90)

52.215-9016 shall be used in large purchase solicitations and awards to alleviate difficulties if DFAS does not receive Part IV (Section K-M) of the solicitation as part of the award.

(c)(90) Section M, Evaluation factors for award. A provision substantially as provided at 52.214-9002, Trade Discounts, may be included in Request for proposals and Requests for Quotations when appropriate. See 14.201-5 Part IV (c)(90) for the effect of this provision.

(i) The provision at 52.215-9011, Requirements for Quantity Increments or Ranges may be used to solicit prices for quantity increments (e.g., 500, 1000, 1500, 2000 units) or quantity ranges (e.g., 500-999, 1000-1499, 1500-1999 units).

(ii) For negotiated contracts which are anticipated to be awarded using the adequate price competition exemption to the P.L. 87-653 requirements at FAR 15.403-1(b)(1), price shall be stated to be a substantial factor. If weights are assigned to the various evaluation factors, price must be weighted at least 20 percent for an adequate price competition exemption to be claimed.

(iii) Defense Energy Support Center (DESC) is authorized to use DESC clause 52.215-9F33 Shipping Point(s) used in Evaluation of F.O.B. origin offers (FUELS APR 1984) in lieu of FAR clause 52.214-7, late Submissions, Modifications, and withdrawals of Bid, and with the Strategic Petroleum Reserve (SPR) program.

(c)(90)(iv) For automated procurements only, when all or none offers for an entire item quantity is desired, use provision 52.215-9009, All or None for Automated Procurements.

(c)(90)(v) For non-automated procurements, when all or none offers for an entire item quantity or for a group(s) of items is desired, use provision 52.215-9010, All or None (IFB/RFP only)

(c)(90)(vi) Insert the provision 52.215-9018, Authorized Limitation, in solicitations which have more than one item, where award is to be made by item; or which have more than one lot, where award is to be made by lot.

15.209 Solicitation Provision and Contract Clauses

(e) When 52.215-5 is included in the solicitation, insert the provision at 52.215-9008 Facsimile Bids and Proposals in DSCR solicitations if facsimile proposals are authorized. For DSCC and DSCP solicitations use Alternates I & II to replace paragraph (c) as appropriate.

SUBPART 15.3 - SOURCE SELECTION

15.301 Definitions.

“Preaward survey (PAS) evaluation factor” is an amount of money which is added solely for evaluation purposes to the offer of an apparently successful offeror whose performance history normally dictates the conduct of a preaward survey.

Source inspection evaluation factor” is a fixed amount of money added solely for evaluation purposes to the offer of an apparently successful offeror with a history of delivering nonconforming material on destination-assigned contracts/purchase orders.

15.303 Responsibilities.

The Director, Acquisition Management, (J-7) h as delegated the authority to appoint the source selection authority, if other than the contracting officer, to the Chief of the Contracting Office (CCO). (See 2.101 for designation of the CCO at each of the contracting activities/offices). This delegation is not further delegable. Notwithstanding this delegation, the Director, Acquisition Management, (J-7) reserves the right to designate the source selection authority for acquisitions on an exception basis, including acquistions subject to I-ARB review (see 7.104-90). FAR Part 3 provides guidance regarding improper business practices and personal conflicts of interest that must be considered in the conduct of an acquisition.

15.304 Evaluation factors and significant subfactors.

> (b) Each evaluation factor or subfactor for a given solicitation must address a separate aspect of the offeror’s proposal or capabilities in order to avoid double counting. For example, past performance may not be evaluated as a separate technical evaluation factor if the same performance is evaluated elsewhere as part of another evaluation factor or subfactor. It is not double counting, however, to combine a delivery evaluation factor, which evaluates different offered delivery dates, with the past performance factor (e.g., the Automated Best Value System), which evaluates past performance in assessing the risk that an offeror will not deliver on the promised date.

> (c)(3) Statute (15 U.S.C. 637(d)(4)(G)(i) and (ii)) requires that, where a bundled requirement (see section 7.107) offers a significant opportunity for subcontracting, the procuring agency must designate the following factors as significant factors in offer evaluation:

- A factor that is based on the rate of participation provided under the subcontracting plan for small business in the performance of the contract; and

> - For the evaluation of past performance of an offeror, a factor that is based on the extent to which the offeror attained applicable goals for small business participation in the performance of contracts.

(4) Use of small, small disadvantaged and women-owned small businesses (socioeconomic evaluation factor). To implement the guidance contained in FAR 15.304(c)(4) and DFARS 215.304(c)(i), the contracting officer shall establish an evaluation factor to evaluate the extent of an offeror's proposed use of small, small disadvantaged and women-owned small businesses, or historically black colleges/universities or minority institutions (HBCUs/MIs), in order to incentivize offerors to subcontract with such concerns. The weight or relative order of ranking of this factor is at the discretion of the contracting officer, but this factor may not be combined with any other factor. Although this factor only applies to acquisitions that require submission of a subcontracting plan, the factor itself should be separate and distinct from the subcontracting plan (FAR 19.219-9) as well as from use of the MBA factor (see (c)(90)) and the factor to promote use of Javits-Wagner-O'Day Act (JWOD) entities (see (c)(91)). All offers submitted in response to the solicitation, whether from small or large businesses, shall be scored/rated on this factor, except that acquisitions that are set aside for small business, or for very small business or HUBZone participation, shall not include this factor. Proposals that demonstrate a strong commitment to affording small, small disadvantaged, and women-owned small businesses, or HBCUs/MIs, a real opportunity to participate shall be rated more favorably than those that demonstrate little or no such commitment.

(A) In making decisions whether to exercise options on contracts, the contracting officer shall evaluate whether a firm has or has not performed in accordance with its small, small disadvantaged and women-owned small business, or HBCU/MI, subcontract requirements in the contract. The Defense Contract Management Agency's small business offices shall be used to assist in assessing a contractor's compliance with these requirements.

(B) Solicitation provisions. Solicitation provisions similar to the ones at 52.215-9002, Socioeconomic Proposal, and 52.215-9003, Socioeconomic Support Evaluation, shall be included in all solicitations that meet the criteria in 15.304(c)(4).

(c)(90) DLA Mentoring Business Agreements (MBA) Program evaluation factor. Proposed participation in the DLA MBA Program (see 19.90) shall be separately considered as an evaluation factor in all long term contracts expected to exceed $500,000.

> (c)(91) Use of Javits-Wagner-O’Day Act (JWOD) qualified nonprofit agencies for the blind or other severely disabled – evaluation factor. The contracting officer shall establish an evaluation factor for the extent of an offeror's proposed use of Javits-Wagner-O'Day Act (JWOD) qualified nonprofit agencies for the blind or other severely disabled, in order to incentivize offerors to subcontract with such concerns. (See 8.702.) The weight or relative order of ranking of this factor is at the discretion of the contracting officer, but this factor may not be combined with any other factor. This factor is separate and distinct from both the socioeconomic evaluation factor described in (c)(4), and also from the MBA factor (see (c)(90). All offers submitted in response to the solicitation, whether from small or large businesses, shall be scored/rated on this factor, except that acquisitions that are set aside for small business, or for very small business or HUBZone participation, shall not include this factor. Proposals that demonstrate a strong commitment to affording JWOD entities a real opportunity to participate in the Government contracting arena (beyond the statutorily mandated use of these entities by prime contractors; see FAR 8.001(c)) shall be rated more favorably than those that demonstrate little or no such commitment.

> (i) In making decisions whether to exercise options on contracts, the contracting officer shall evaluate whether a firm has or has not performed in accordance with its commitment to use of JWOD entities. Field elements of the Defense Contract Management Agency shall be used to assist in assessing a contractor's compliance with these requirements.

(ii) Solicitation provisions. Solicitation provisions similar to the ones at 52.215-9004, Javits-Wagner-O'Day Act Entity Proposal, and 52.215-9005, Javits-Wagner-O'Day Act Entity Support Evaluation, shall be included in all solicitations that meet the criteria in 15.304(c)(91).

(iii) Contract clause. A clause substantially the same as the one at 52.215-9006, Javits-Wagner-O'Day Act Entity - Contractor Reporting, shall be included in each contract for which the successful offeror submitted a JWOD entity subcontracting proposal with its offer.

(c)(92) Transportation evaluation preference. Consistent with Department of Defense (DoD) Transportation Acquisition Policy and DoD Readiness objectives, solicitations for integrated logistics management arrangements, such as prime vendor, virtual prime vendor, On Demand Manufacturing, Quick Response, ECAT, and EMall, that may include contractor arranged transportation outside the continental United States, shall include an evaluation factor favoring offerors whose transportation arrangements include the use of carriers with commitments to DoD mobility agreements under Civil Reserve Air Fleet (CRAF) and the Voluntary Intermodal Sealift Agreement (VISA).

> (A) When contracting for commercial transportation providers, the requirement of the contractor to support DoD contingency requirements through participation in the Civil Reserve Air Fleet (CRAF) and Voluntary Intermodal Sealift Agreement (VISA) programs, and the required use of Electronic Commerce/Electronic Data Interchange (EC/EDI) and the required providing of their In-Transit Visibility (ITV) data to DoD shall be used as evaluation criteria. A sample evaluation factor and language describing the factor for inclusion in solicitations are shown below.

(i) Description of the preference

This solicitation, consistent with Department of Defense (DoD) Transportation Acquisition Policy and DoD Readiness objectives, includes a transportation preference that favors contractors whose transportation arrangements outside of the continental United States (OCONUS) include the use of carriers with commitments to DoD mobility agreements under Civil Reserve Air Fleet (CRAF) and Voluntary Intermodal Sealift Agreement (VISA).

Offerors, as a part of their proposal, shall indicate the carriers that the offeror will use for air and ocean transportation, if awarded the contract. Offers received will be evaluated to determine the degree of commitment to DoD readiness programs.

Under CRAF, select civil air carriers are contractually committed to support airlift requirements in emergencies when U.S. airlift needs exceed the capability of military aircraft. DoD provides financial incentives via transportation contracts with air carriers in exchange for pledged aircraft for international, long-range, short-range, domestic and Alaskan transportation requirements ready for activation, when needed. During activation, DoD controls the mission of these aircraft. Air carriers continue to operate and maintain their committed aircraft with their own resources. Before receiving a CRAF contract, air carriers must be certified as DoD-approved.

If air transportation OCONUS is anticipated, offerors should provide the name of the transportation company and a statement as to whether the transportation company(ies) has/have a commitment to CRAF. CRAF carriers are preferred.

The VISA was jointly developed by the Department of Transportation Maritime

Administration, the DoD, and industry to make intermodal shipping services/systems,

including ships, intermodal equipment and related management services available to

the Department of Defense to support the emergency deployment and sustainment of U.S.

Military forces by augmenting the capacity of DoD’s organic sealift capabilities.

If ocean transportation is contemplated, offerors should provide the name of the

company(ies) and category(ies) shown below that best describes the transportation

arrangements under the proposed contract. VISA preferences are as follows:

a. U.S. Flag vessel capacity operated by a Participant and U.S. Flag Vessel Sharing Agreement (VSA) capacity of a Participant.

b. U.S. Flag vessel capacity operated by a non-Participant.

c. Combined U.S. flag/foreign flag vessel capacity operated by a Participant and combination U.S./foreign flag VSA capacity of a Participant.

d. Combined U.S. flag/foreign owned vessel operated by a non-Participant

e. U.S. owned or operated foreign flag vessel capacity and VSA capacity of a non-Participant.

f. U.S. owned or operated foreign flag vessel capacity and VISA capacity of a non-Participant

g. Foreign-owned or operated foreign flag vessel capacity of a non-Participant.

For further information on the Voluntary Intermodal Sealift Agreement, see Federal Register Notice of February 13, 1997 (Volume 62, No. 30, pages 6838 - 6846).

(ii) Evaluation factor:

The extent to which the offeror has, or uses other companies that have, CRAF and VISA commitments in both its DoD and commercial shipping methods.

> (c)(93) Surge and Sustainment (S&S) evaluation factor. S&S will be evaluated in accordance with the terms and conditions of the solicitation. Refer to DLAD 17.9307, Surge and Sustainment Pricing and Evaluation.

(c)(94) Cost of Source Inspection evaluation factor. (See also (13.106-90(a), 14.201-8(a)(90), and 52.213-9001). When contractors deliver nonconforming supplies or provide nonconforming services, the contracting officer normally requires inspection and acceptance at source, rather than at destination. The evaluation factor for source inspection is the expression of the Government’s recognition that it incurs costs resulting from poor contractor performance or from contractor demands for additional Government performance not otherwise considered necessary from the Government’s perspective. When the conditions set forth in 13.106-90(a) exist, the provision at 52.213-9001, Evaluation Factor for Source Inspection, shall be inserted in solicitations. The coverage at 13.106(90)(a) applies regardless of the dollar value of the acquisition.

(A) The source inspection and preaward survey cost factors in offer evaluation can be applied to any procurement. They can be applied in conjunction with any source selection method.

(c)(95) Cost of preaward survey (PAS) evaluation factor. (See also 13.106-90(b), 14.201-8(a)(91), and 52.215-9001)). When a contractor delivers nonconforming supplies or provides nonconforming services or is delinquent in delivery, the contracting officer normally requires a PAS to determine such offeror’s responsibility for subsequent acquisitions. (See 9.106) The contracting officer also generally requests a PAS regarding a prospective contractor in accordance with the criteria listed at (A) through (F), below. The evaluation factor for conduct of a preaward survey is the expression of the Government’s recognition that conducting a PAS is an additional expense to the Government. There are certain situations (based on a contractor’s prior performance) for which it is appropriate to apply a factor for offer evaluation purposes to the apparently low offer of a prospective contractor when the Government must base its responsibility determination on the results of the survey of that firm or individual. When these situations exist, the provision at 52.215-9001, Evaluation Factor for Preaward Survey, shall be inserted in solicitations. Additionally, an amount which is the equivalent of the cost of the survey, currently $369.00, shall be added to the offeror’s proposed price for each survey, regardless of the level of survey (formal or informal) to be performed. The cost of the PAS shall be added to the offer of a prospective contractor (manufacturer or non-manufacturer) who:

(A) Has been listed on the GSA List of Parties Excluded from Federal Procurement Programs within the past three years (or other locally-determined time period); or

(B) Is undergoing or has undergone reorganization under bankruptcy laws within the past three years (or other locally-determined time period); or

(C) Is known to the contracting officer to have a poor or marginal performance history; or

(D) Has, within the past year (or other locally-determined time period), received a negative PAS for an item within the same Federal Supply Class (FSC), or for the same type of service, as the item or service being purchased; or

(E) Has failed to liquidate indebtedness to DLA (the extent of such indebtedness shall be determined locally); and

(F) The contracting officer has determined must be surveyed for the contracting officer to make a responsibility determination (see 9.104-1(90)(a) and 9.106-1).

> 15.304-90 Automated best value system.

> 15.304-90 Automated Systems Supporting Contractor Past Performance Evaluation.

(a) Scope. This subsection provides policies and procedures for using automated systems in evaluating contractor past performance as a non-priced factor in best value award decisions. This subsection applies to manually evaluated negotiated best value acquisitions for the Maritime, Land, Aviation, and Construction & Equipment Supply Chains. See also mandatory guidance at PGI 15.304-90.

(1) Supply Chains not listed in paragraph (a) above shall continue to utilize their established past performance evaluation processes and systems, until such time that use of PPIRS-SR is mandated for their Supply Chain.

(b) General Past Performance Evaluation Information.

(1) Past performance is an indicator of a contractor’s ability to perform satisfactorily on future contracts.

(2) When assessing a contractor’s past performance, the Contracting Officer should consider the contractor’s volume of business as a measure of confidence concerning performance risk on future contracts. Contractors demonstrating little or no performance history may ultimately represent lower performance risk than contractors with marginal or poor performance. Contracting Officers must exercise sound judgment when evaluating contractors which have a wide disparity in volumes of business.

(3) The lack of relevant past performance information does not preclude the Contracting Officer from making an award to a contractor. See FAR 15.305(a)(2)(iv) regarding treatment of offerors without a record of relevant past performance.

(4) When assessing a contractor’s performance risk on an anticipated award, consideration should be given to the weapon-systems and personnel support designation of the item or group of items being procured.

(5) Contracting Officers must ensure that past performance is evaluated in terms of relative importance to other priced and non-priced evaluation factors, as stated in the solicitation.

(c) Applicability. Past performance information may be used –

(1) in source selection decisions;

(2) when determining whether to exercise an option;

> (i) When exercise of an option is contemplated, the contractor's current past performance information should be considered in determining whether exercising the option is the most advantageous method of satisfying the Government's needs. The contracting officer's decision to exercise an option at a higher price than what may otherwise be available (see FAR and DLAD 17.207(e)(90)) should be based on the same evaluation factors that applied to the basic award;

(3) when determining whether to request a preaward survey;

(4) in conjunction with total small business set-asides and total small and

disadvantaged business set-asides (but see FAR 19.502-3(b)(2) when a requirement is to be partially set-aside for small business).

(5) For additional discussion concerning contractor past performance information, see FAR Subpart 42.15.

(d) Past performance information shall not be used to -

(1) determine a contractor’s technical acceptability;

(2) make responsibility determinations (but may be used to determine whether to request a Preaward Survey).

(e) Policy. In July 2002, the Department of Defense (DoD) endorsed the Past Performance Information Retrieval System (PPIRS) as the single authorized system for receipt and for retrieval of contractor past performance data for DoD acquisitions.

(1) The Office of the Under Secretary of Defense (OUSD) for Acquisition, Technology & Logistics (AT&L), Defense Procurement and Acquisition Policy (DPAP) has mandated the use of PPIRS by all Military Departments, Defense Agencies and DoD Field Activities. On December 21, 2007, OUSD/AT&L mandated initial deployment of the newest PPIRS iteration, the Past Performance Information Retrieval System-Statistical Reporting (PPIRS-SR). DLA is positioning the Enterprise to transition from its current vendor past performance assessment tool, the Automated Best Value System (ABVS) to the Past Performance Information Retrieval System – Statistical Reporting (PPIRS-SR).

(2) Until such time that the ABVS is retired, DLA will continue to utilize the ABVS as a proxy for the PPIRS-SR.

(3) Except as set forth in paragraph (4) of this section, all manually evaluated negotiated best value acquisitions, for which past performance is an evaluation factor, shall utilize ABVS for past performance evaluation in award decisions.

(4) In order for the Government to assess performance risk, if the quoter/offeror having the lowest evaluated price also has an ABVS FSC score below 70 and would potentially be bypassed under best value in favor of a higher priced quoter/offeror with a higher ABVS FSC score, then past performance evaluation will be accomplished using PPIRS-SR, in lieu of ABVS, for all quotes/offers received.

(5) Acquisitions meeting the dollar thresholds for the specific Business Sectors outlined below, Acquisition Specialists shall use past performance assessment information contained in the Past Performance Information Retrieval System - Report Card (PPIRS-RC) in addition to the past performance information contained in ABVS or PPIRS-SR. See DoD Class Deviation 99-O0002, Past Performance, issued on January 29, 1999, cited at DFARS 215.304 Evaluation factors and significant subfactors. For Business Sector definitions, see “A Guide to Collection and Use of Past Performance Information, Appendix B: Business Sectors”, at DoD Guide to Collection and Use of Past Performance Information (May 2003)

Business Sector Dollar Threshold

(i) Systems (includes new development

and major modifications) > $5,000,000

(ii) Operations Support > $5,000,000

(iii) Fuels > $100,000

(iv) Healthcare > $100,000

(v) Services > $1,000,000

(vi) Information Technology > $1,000,000

(vii) Construction > $550,000

(viii) Architect-Engineering > 30,000

(ix) Science and Technology As required

(f) Solicitation Provision.

(1) The solicitation provision regarding use of past performance must specify:

(i) When used in best value source selections, past performance information will be evaluated based upon a comparative assessment among contractors from which quotes/offers were received;

(ii) The timeframe over which past performance will be evaluated;

(iii) Sources of the performance data;

(iv) DSC/supply chain focal point (address and telephone number) for questions/ challenges; and,

(v) Discrepant data resolution process.

(2) The Contracting Officer shall insert the provision at 52.215-9022, Contractor Past Performance Evaluation – Automated Systems, in all acquisitions in which past performance will be used as an evaluation factor in best value award decisions. However,

Contracting Officers are not precluded from collecting/analyzing past performance information in addition to ABVS/PPIRS for acquisitions in excess of the SAT.

15.304-91

Insert 52.215-9015 in C&T solicitations when a solicitation calls for an item producible with facilities that also could be used for the production of other items being purchased simultaneously under a separate solicitation.

15.305 Proposal Evaluation.

(a) When soliciting for a long-term contract and an offer for a fixed quantity is received, the contracting officer shall consider whether the quantity offered meets the requirements of the solicitation. If so, the contracting officer shall consider the offer to be responsive to the solicitation. If not, the contracting officer shall reject the offer as not conforming to the solicitation and shall forward a summary of the offer to the item manager (supply planner). The item manager (supply planner) shall take appropriate action in the best interest of the Government, based on the item manager’s (supply planner’s) judgment; such as initiating a separate, fixed-quantity purchase request, if warranted by the agency’s supply position.

> (a)(4) The Chief of the Contracting Office is delegated authority to determine whether technical evaluators may have access to cost information.

(a)(5) As stated in the FAR, the procuring agency must give to the small business offeror on bundled acquisitions the highest possible score for the factors set forth in 15.304 (c)(3), above. However, note that subcontracting plans are not required from small business concerns, and are only required from large businesses for contracts valued at $500,000 or more ($1 million or more in the case of construction).

> 15.308 Source Selection Decision

(90) (a) The Source Selection Authority (SSA) must perform the analysis and make the source selection decision. The Source Selection Authority’s Decision Document (SSDD) must identify and evaluate the significant differences between proposals, and assess relative value.

(b) The rationale and justification for business decisions and non-cost/technical tradeoff determinations must be reasonable, consistent with evaluation factors listed in the solicitation, and adequately documented. “Adequately documented” means written point-by point qualitative comparisons of the solicitation’s source selection criteria with the offer, and the rationale for any business judgments or tradeoffs. (Specific reference, to include page and paragraph numbers, is useful during review.) The rationale must include a comparative analysis of offerors’ relative strengths and weaknesses in all factors and sub-factors and their advantages or disadvantages to the Government. There is no requirement to give credit for special features of a proposal, if it has been reasonably determined and documented that such features will not make a meaningful contribution or better satisfy government needs. (See 15.308(91).)

(c) The SSDD should not contain conclusory statements, partial comparisons, or generalizations. For instance, use quantities or percentages, rather than the generalized “many.”

(d) When planning highly complex acquisitions, establishment of a formal Source Selection Advisory Board (SSAB) or Source Selection Advisory Council (SSAC) is suggested. The board should consist of members with relevant expertise who may also serve as members of the non-cost evaluation team. The SSAC or SSAB performs the comparative analysis and makes a recommendation per (e) below.

(e) When the SSA is other than the contracting officer, the contracting officer and/or evaluators with relevant expertise will evaluate the proposals in their respective areas and provide written documentation of the results. The documentation of non-cost factors must include a rating that reflects the strengths and weaknesses of the proposals. Cost/price documentation must include details on the cost/price proposals, cost/price differences, and cost/price reasonableness. The SSA may use one of the following three procedures in making the Source Selection Decision:

(1) The SSA solely performs the comparative analysis. The SSA will perform the comparative analysis of the cost/price, technical, past performance, socioeconomic, and other non-cost factors of each offer determined by the contracting officer to be within the competitive range. The SSA will write the SSDD. The SSDD will document the differences among the offers, including strengths and weaknesses, and the advantages or disadvantages to the Government. This integrated assessment of the offers will include the benefit of any cost/price trade-off, detailing the rationale for selecting the awardee over the other offerors. The analysis must be consistent with the source selection criteria in the solicitation.

(2) The contracting officer performs the comparative analysis first, and makes a recommendation to the SSA. The contracting officer will evaluate the proposals and provide written documentation of the analysis and recommendation for the SSA that will be a summary of all offers, recommend factors that may be considered as particularly valuable in a tradeoff analysis and suggest a potential awardee. The SSA should then read the supporting documentation, review the rating, independently extrapolate and evaluate tradeoff options, and come to an independent conclusion that need not be the same as the one suggested by the contracting officer. The SSA will then write the SSDD. The SSDD will document the differences among the offerors, including strengths and weaknesses, and the benefit or lack of benefit to the Government. This integrated assessment of the offers will include the benefit of any cost/price trade-off, detailing the rationale for selecting the awardee over the other offerors.

(3) The contracting officer drafts the SSDD. The contracting officer will perform the comparative evaluation and document the file on the cost/price and non-cost factors. The contracting officer will also draft the SSDD for the SSA. The SSDD will document the difference between the offerors, including strengths and weaknesses, and the benefit or lack of benefit to the Government. This integrated assessment of the offers will include the benefit of any cost/price trade-off, detailing the rationale for selecting the awardee over the other offerors. The SSA must perform an independent review and evaluation. If the SSA concurs with the contracting officer’s suggestion, the SSA may adopt that decision by signing the document. The SSA may reject the contracting officer’s draft. Then the SSA may write the SSDD or edit the draft SSDD to reflect the SSA’s independent conclusion. The analysis must be consistent with the source selection criteria in the solicitation.

(f) If the contracting officer is the SSA, the content requirement of the SSDD is the same.

(g) If the solicitation requires a determination of price realism, this determination is made following the cost/price and non-cost evaluations. Realism decisions must also be fully documented

(91) Specific features included in a proposal may be reasonably determined to provide no meaningful satisfaction of government needs or to be of no benefit to the government under the solicited requirement. When the SSA determines that one or more features provide no additional benefit to the government, the decision documentation must provide the rationale and justification for the determination.

(92) The SSDD does not need to be a lengthy document, but it needs to:

(i) Describe the solicited requirement.

(ii) Specify the number of offers included in the competitive range.

(iii) Name the offerors.

(iv) List non-cost evaluation factors and subfactors and their relative importance as cited in the solicitation.

(v) List each offeror’s overall factor ratings and subfactor ratings. Include cost/price in the listing.

(vi) Provide a narration comparing the non-cost rating of each proposal, to include the strengths and weaknesses.

(vii) Describe the business justification, and/or cost benefit analysis of the best value decision.

15.308-93

Use 52.215-9020, Instructions for Submitting Product Demonstration Models (PDM) for Supply Chains at DSCP, in competitive negotiated solicitations using source selection procedures when Product Demonstration Models (PDMs) are used. The buyer/CO needs to check-off paragraph (c) when using the PDM as a “manufacturing standard” or allow the contractor to utilize “alternate” material in the PDM. However, they should not be used together. This provision only applies to the Supply Chains at DSCP.

(a) The number of models required will be determined by the number and type of testing criteria. The contracting officer will make the determination based on input from the technical evaluators. The contracting officer is responsible for ensuring that the number of models requested is reasonable and realistic considering the estimated dollar value and size of the end item.

(b) When removing identifying information will not destroy the product, the contracting officer will make all efforts to remove all identifying information from the PDM without destroying the product prior to submitting the PDM for technical evaluation to preclude bias on the part of the technical evaluators.

15.308-94

Use 52.215-9019, Operational Capability Demonstration, in solicitations for medical equipment and instruments when recommended by cognizant technical personnel/the requiring activity, and best value source selection evaluation procedures will be used. Use this clause when the acceptability of the item(s) offered can be evaluated by the written technical proposal alone, but an operational capability test is needed to functionally test the item(s) prior to award.

SUBPART 15.4 – CONTRACT PRICING

> 15.401 Definitions.

“Attribute acceptance sampling.” Attribute acceptance sampling is typically used for evaluating a contractor’s internal controls. This includes the evaluation of policies, procedures, and practices to determine the adequacy of internal controls for detecting and preventing operational deficiencies. Since perfection is seldom expected, there is some level of non-compliance that can be tolerated. Attribute acceptance sampling is designed to discern whether non-compliance is within tolerable limits. Attribute acceptance sampling is not designed to identify questionable costs or the reasonableness of prices included in a contractor’s catalog. For purposes of DoD EMALL contracting personnel will use variable sampling as described below to support price reasonableness determinations.

“Catalog price.” A catalog price means a price included in a catalog, price list, schedule, or other form that is regularly maintained by the manufacturer or vendor, is either published or otherwise available for inspection by customers, and states prices at which sales are currently, or were last, made to a significant numbers of buyers constituting the general public (FAR 2.101).

“Commercial catalog.” A commercial catalog is a catalog of items meeting the FAR 2.101 definition of commercial item.

“Confidence level.” Confidence level is the assurance (or probability) that the amount being estimated by the sample will fall within a specified range (or interval) determined from sample results. A confidence interval is commonly (but not always) defined as the point estimate plus or minus the precision amount. For example, a 95 percent confidence level indicates that with repeated sampling under the same sampling plan, 95 times out of 100 the actual universe is expected to be within the interval computed from the sample results. In practical terms, this means that any single sample has a 95 percent chance of producing an interval that includes the actual universe amount. For a given sample size, the more confident an evaluator wants to be that the confidence interval contains the true amount, the wider the interval must be.

> "Cost or pricing data" also encompasses decrement factor information.

> "Decrement factor information" is the historical data necessary to determine the average difference between vendors' and subcontractors' proposed prices and the actual prices negotiated by the contractor with a specific supplier, all suppliers, or suppliers for a specific contract, commodity, or commodity group.

“Dollar unit sampling (DUS).” Dollar unit sampling is a substitute for stratification by dollar amount. In general, the two approaches are roughly similar in what they can accomplish. DUS does have an advantage in dealing with selected items that prove to be clusters of smaller physical units. Dollar unit sampling’s selection probability proportional to size (PPS) feature concentrates the sampling evaluation towards larger items much the same as stratification does for physical unit sampling. Collectively, the dollars making up an item give that item a chance of selection proportionate to its size in the universe. Dollar interval selection is used to select DUS samples. Dollar unit sampling implies that “dollar units” or “dollar hits” as opposed to physical units are being sampled. Physical units (e.g., invoices or price lists) are the sampling unit, with the sample items being identified by the dollar hits. In order to evaluate a dollar hit the item (e.g., the cost of the physical unit) containing the dollar hit must be analyzed.

Exclusive Dealers: When Original Equipment Manufacturers (OEMs) use exclusive distributors/dealers to sell their products, the Government usually must buy these products directly from the exclusive distributor/dealer. In these situations, the exclusive dealers are functioning as prime contractors, and the OEMs as subcontractors.

“EZ Quant.” EZ-Quant is statistical software developed and used by the Defense Contract Audit Agency (DCAA) and other Government agencies in evaluation of large universes of data such as a contractor bill of material. DLA contracting personnel will use EZ-Quant in performance of statistical sampling for DoD EMALL catalogs because of its wide acceptance within both the government and contractor community.

“Inferential or inductive statistics.” Inferential or inductive statistics are methods of using sample data taken from a statistical population to make actual decisions, predictions, and generalizations related to an area of interest. For example, in contract pricing we use stratified sampling of a proposed bill of materials to infer the degree it is overpriced or under-priced.

“Precision.” The term “precision” pertains to the amount or degree of probable error associated with an estimate (or the extent to which the sample findings may differ from the actual universe values or conditions). It measures the accuracy of a point estimate by showing, for a specified confidence level, how much the point estimate may vary from the true universe amount. In sampling for variables, precision can be expressed as either: (1) an interval about the point estimate obtained from the sample; or (2) a maximum or upper limit such as less than $25 or less than 5 percent error. In most cases the primary consideration influencing the evaluator’s selection of a desired level of precision will be the potential effect of the error on Government contract costs.

“Desired precision amount.” Desired precision amount is the amount of sampling error, stated as a dollar or percentage amount that is considered acceptable by the evaluator.

“Population.” A population is the set of all possible observations of a phenomenon with which we are concerned. For example, all the part numbers in an offeror’s commercial catalog would constitute a population. A numerical characteristic of a population is called a parameter.

“Random selection.” Random selection is a key principle in statistical sampling. To select randomly is to eliminate personal bias or subjective considerations (which cannot be expressed numerically) from the choice of a sample. Random sampling is a selection process in which each item in a stratum has a known probability (chance) of being selected.

“Sample.” A sample is a subset of the population of interest that is selected in order to make some inference about the whole population. For example, part numbers randomly selected from an offeror’s commercial catalog would constitute a sample. A numerical characteristic of a sample is called a statistic.

“Sampling frame.” A sampling frame is the physical (or electronic) representation of the sampling units from which the sample is actually selected. In sampling for variables, examples of sampling frames include a computer listing of a consolidated bill of materials, or a file of vouchers. For these sampling frames, possible sampling units are a part number, or physical voucher respectively.

“Significance level.” The significance level is equal to 1.00 minus the confidence level. For example, if the confidence level is 95 percent, the significance level is 5 percent. The significance level is then the area outside the interval which is likely to contain the population mean. Setting the significance level depends on the amount of risk you are willing to accept that the confidence interval does not include the true population mean. As the amount of risk that you are willing to accept decreases, the confidence interval will increase. In other words, to be surer that the true population mean is included in the interval, you must widen the interval.

“Statistical reliability.” Statistical reliability of sample findings is measured by two interrelated parameters, precision and confidence level. The evaluator must establish desired values of these parameters for either approach (physical unit or dollar unit) for variable sampling.

“Statistics.” Statistics is a science which involves collecting, summarizing, analyzing, and interpreting data in order to facilitate the decision making process. Statistical sampling is the preferred method of evaluation of less than 100 percent review of universe data. Statistical sampling is preferred over non-statistical (judgmental) sampling because of its advantages, which include objectivity, overall defensibility, and measurability of risk of substantial (or material) sampling error.

“Stratification.” Stratification is the partitioning of the evaluation universe into smaller groups according to a scheme that suits evaluation purposes. The evaluation universe consists of all of the transactions or other basic items within the scope of the evaluation. Stratification does not change the evaluation universe. Stratification is primarily used in variable sampling, and is rarely used in attribute sampling. The usual purpose of stratification is to enhance sampling precision, and thereby decrease the amount of evaluator time required to obtain adequate support for the evaluator’s conclusions.

“Universe.” A “universe” is a group of items or transactions from which information is desired. For purposes of PGI 15.402-91 the term “universe” will refer to the “sampling universe,” the group of items which remains after the large dollar or sensitive transactions have been stratified (or segregated) for complete (as opposed to partial) evaluation.

“Variable sampling.” Variable sampling is generally used to verify account balances or cost elements and note any differences. This type of sampling is substantive testing (as opposed to compliance testing) whereby sample items are evaluated for error amounts or variables (as opposed to attributes). The evaluation sampling universe is the entire grouping of items from which a sample will be drawn. Variable sampling can be applied to proposals, incurred costs, and contractor catalog prices.

> 15.402 Pricing policy.

> Contracting officers must---

> (a)(90) If the price cannot be determined fair and reasonable, spot buys may be used as a last resort to maintain customer support.

> (a)(91) Develop and assure conduct of a systematic repetitive review process with the Supply Chain Cost and Price Analysis Office to assure that “one pass pricing” and similar arrangements

> with contractors (that are relied upon to support determinations that prices are fair and reasonable) will be revalidated periodically within a reasonable period of time so that these arrangements can still be used for purposes of determining item prices fair and reasonable on long term contracts.

15.402-90 Pricing policy – exclusive dealers

(a) DLA contracting officers are required to obtain price and cost-type information, without requiring certification (see FAR 15.402(a)(2)(i) and (ii)), when TINA does not apply and there is no other basis for determining that the proposed prices are fair and reasonable (e.g. through market research and price analysis techniques). In these situations when TINA does not apply, the distributor/dealer must provide its cost-type data when required by the contracting officer. Additional guidance is contained in DFARS Procedures, Guidance, and Information (PGI) Subpart 215.4. Moreover, if the contracting officer is relying on previous prices paid by the Government, the contracting officer must establish that a thorough price or cost analysis was performed on the previous buys (DFARS PGI 215.403-3(4)).

(b) It is critical that all levels of management support the contracting officer in acquiring cost-type data necessary for determining fair and reasonable prices. If the exclusive distributor/dealer’s representative does not provide the information requested by the contracting officer, the situation should be elevated to higher levels of management within both the government and contractor organization. When TINA does not apply, any distributor/dealer who does not comply with the requirement to submit cost-type information for a contract or subcontract is ineligible for award unless the Head of Contracting Activity (HCA) determines that it is in the best interest of the Government to make the award to that offeror in accordance with FAR 15.403-3(a)(4). The contracting officer must ensure the following is clearly documented in support of the request to the HCA:

(1) The effort taken to obtain the data;

(2) The need for the item or service; and,

(3) Increased cost or significant harm to the Government if award is not made.

(c) In the event of an exigent situation when the HCA has approved award without obtaining requested cost data, the contracting activity must notify the Procurement Integrity and Pricing Division (J-73), and J-7 will then notify Defense Procurement, Acquisition Policy, and Strategic Sourcing (DPAPSS) (see mandatory PGI 15.402-90).

15.402-91 Pricing Policy - EMall

(a) FAR 15.403-3(c)(1) states that at a minimum, the contracting officer must use price analysis to determine whether the price is fair and reasonable whenever the contracting officer acquires a commercial item. The fact that a price is included in a catalog does not, in and of itself, make it fair and reasonable. If the contracting officer cannot determine whether an offered price is fair and reasonable, even after obtaining additional information from sources other than the offeror, then the contracting officer must require the contractor to submit information other than certified cost and pricing data to support further analysis in accordance with FAR 15.404-1 proposal analysis techniques. In most situations the contracting officer should be able to obtain information needed to perform price analysis on commercial catalogs. However, in limited situations where price analysis is not adequate, the contracting officer should request other than certified cost and pricing data and perform cost analysis.

(b) Determining the price reasonableness of a commercial catalog for the DOD EMALL poses a challenge due to the number of items in a catalog, e.g. 50,000 or more, with minimal or no historical demand or sales data, coupled with low (below the micropurchase threshold) prices. The contracting officer shall use the mandatory procedures in PGI 15.402-91 in making price reasonableness determinations for new commercial catalogs to be placed on EMALL, additional items added to existing catalogs, or renewal of catalogs.

(c) Situations for using statistical analysis. Statistical analysis can be invaluable to use in developing the Government objective for contract prices based on historical values. Historical costs or prices are often used as a basis for prospective contract pricing. When several historical data points are available, you can use statistical analysis to evaluate the historical data in making estimates for the future. Statistical analysis is particularly useful in the analysis of commercial catalogs with large numbers of items where an overall price reasonableness decision is made on the catalog based on the items statistically selected for review.

(d) Applicable principles in using statistical analysis. Most audit universes are widely dispersed. Usually, there is a wide variation between the smallest and largest individual dollar amounts, with most of the amounts being relatively small and only a few amounts being very large. Since a random sample from the entire universe would probably include only a few large (high dollar) items, the reliability of the results would be correspondingly low. This is possible because wide variations are likely between questionable amounts for individual large items and the average of questionable amounts from the universe. These issues can be addressed by a combination of stratification and random sampling.

(e) Stratification involves the evaluation of a large quantity of data without sacrificing quality. Stratified sampling techniques allow examination of 100 percent of the items with the greatest potential for cost reduction, while random sampling helps assure that there is no general pattern of overpricing smaller dollar items. Stratification of the universe into several dollar ranges or strata can be used to improve the review reliability and reduce the overall number of items evaluated. Normally, the universe is stratified into high-dollar stratum (for 100 percent evaluation) and several other strata from which samples are selected for evaluation. The review effort is concentrated on the high-dollar items where the risk is greatest. The samples are statistically selected (random sampling) from each of the other strata, which are used as the basis for making decisions on the price reasonableness of the corresponding universe.

(f) The exact number of strata for statistical sampling will depend on the dollar range of various catalogs (based on judgment of the evaluator). The underlying assumption of random sampling is that a sample is representative of the population from which it is drawn. If the sample is fairly priced, the entire stratum is assumed to be fairly priced. Conversely, if the sample is overpriced, the entire stratum is assumed to be proportionally overpriced.

(g) We do not want Contracting Officers and Cost/Price Analysts to perform 100 percent review of the entire commercial catalog, because of the limited resources available, and the relative risk of overpayment by not performing 100 percent review. However, we must have an acceptable methodology for determining price reasonableness of the entire catalog through a viable review process. Therefore, we will use statistical sampling in our reviews. Statistical sampling is preferred over judgmental sampling, because of its advantages, which include objectivity, overall defensibility, and measurability of the risk of substantial (material) sampling error. In a randomly selected sample each item has a known chance (or probability) of being selected. The results of a statistically selected sample can be objectively applied to the universe from which it was drawn to assist the evaluator in projecting the results of evaluation of the sample to the universe. You should not attempt to project results to the universe if the sample was not randomly selected.

(h) In sampling for variables, there is no single “best sample size.” Sample size is a compromise between the inversely related considerations of precision and evaluator time.

Evaluating too many sample items can result in achieving greater precision than necessary. That is, more resources will have been devoted to sample analysis than necessary. Therefore, the use of EZ-Quant software is mandated to ensure selection of the proper sample size. The EZ-Quant sample size estimation option allows the evaluator to determine the optimum sample size for variable sampling based on three factors: (1) presumed error rate or the results of a sample from a similar evaluation universe; (2) precision amount; and (3) confidence level.

(i) Sampling plan. The successful application of statistical sampling begins with the design of the sampling plan. General sampling plan elements are list below.

(1) Briefly state the objective of the sample or what the evaluator is looking for in the universe. For example, “The objective is to determine price reasonableness of offeror’s catalog.”

(2) Describe the universe and state its size.

i. Describe the sampling unit (i.e. the basic auditable item to be examined);

ii. Specify the scope of the review so that all sampling units pertinent to the sampling objective can be identified; and,

iii. State the size of the universe (i.e. the total number and amount of all sampling units).

(3) Select the universe size – the number and value (if applicable) of all sampling units. An example is the universe of 5,000 catalog items totaling $2,000,000.

(4) Describe the sampling frame. This is the physical or electronic representation of the universe to which the mechanics of sampling will be applied, for example, an Excel spreadsheet of the offeror’s parts catalog with associated prices.

(5) Select a suitable sampling approach. When performing variable sampling the reviewer may choose physical unit sampling or dollar unit sampling (DUS).

(6) Develop the sampling reliability parameters.

(7) When sampling for variables establish a sample size using sample sizing utilities in DCAA EZ-Quant.

(8) Describe the sample selection method.

(9) A copy of the sampling plan and a cross reference to the items reviewed for price

reasonableness shall be retained in the contract folder for each catalog reviewed.

> 15.403 Obtaining cost or pricing data.

> 15.403-1 Prohibition on obtaining cost or pricing data (10 U.S.C. 2306a and 41 U.S.C. 254b).

> (b) Exceptions to cost or pricing data requirements. The existence of an exemption or a Truth in Negotiations ACT (TINA) waiver does not alter the requirement for performing some form of price or cost analysis to ensure price reasonableness (see FAR 15.404-1(a)(1) and (2)) and for documenting the results (see FAR 15.406-3(a)(11)).

> (c) Standards for exceptions from cost or pricing data requirements.

> (1) Adequate price competition. In an effort to decide whether additional information is necessary to determine the reasonableness of the otherwise successful offeror’s price in instances of limited/questionable competition, the contracting officer shall review it in comparison to prior prices paid, considering any changed conditions (see FAR 15.403-1(c)(iii)).

> (3) Commercial items. See 15.404-1(a)(92).

> (4) Waivers.

> (A)(2) Senior Procurement Executive coordination. Where appropriate, the SPE (J-7) shall coordinate on exceptional case TINA waiver D&Fs estimated to exceed $100 million (calculated using the appropriate subparagraph (15.403-4(a)(1)(i)(90),-(ii)(90), or –(ii)(91)) signifying approval of a request elevated from a Supply Chain HCA for authorization of the Supply Chain HCA to grant the waiver; and prior to executing a D&F elevated for grant of an exceptional case TINA waiver on behalf of a contracting office not designated as a contracting activity (see DFARS PGI 215.403-1(c)(4)(A)(2)).

> (A)(90) For an award or modification action which is subject to TINA requirements and to which none of the other statutorily-sanctioned exemptions (adequate price competition, price set by law or regulation, commercial item, or modifying a contract for commercial items per FAR 15.403-1(b)(1) through (b)(3) and (b)(5)) are applicable, the contracting officer should consider seeking an exceptional case TINA waiver. An exceptional case waiver may be granted, however, only when all three of the findings required by Section 817 of the Fiscal Year 2003 National Defense Authorization Act are met (see DFARS 215.403-1(c)(4)). A waiver shall not be granted simply because the price can be determined fair and reasonable without the submission of cost or pricing data. The contracting officer shall take the following actions if a TINA waiver will be pursued:

> i. Advise the offeror or contractor as applicable, of any requirement for cost or pricing data as identified in the relevant data requirements clause included in the

> solicitation or contract, request submission of the relevant data, and determine whether the offeror/contractor, as applicable, has provided TINA data in the past (DPAP memo, March

> 23, 2007, subject: Waivers Under the Truth in Negotiations Act (TINA) stated “TINA waivers should not be granted to contractor business segments that normally perform Government contracts subject to [and in compliance with] TINA.”) y

-

> ii. If the offeror/contractor refuses, request the refusal be put in writing, with

> an explanation of why the required data is being withheld or no longer being provided, if

> applicable.

> iii. Decide whether the offeror’s/contractor’s price can be determined fair and

> reasonable based on a price comparison to a prior competitive buy or some other authorized means of price analysis.

> iv. Elevate the efforts to obtain TINA data through the offeror’s business segment officials and

> 1. through the DLA Supply Chain channels for action by the Chief, Commodity

> Business Unit, or through Detachment channels, where applicable, to their Senior Reviewing Official; and if unsuccessful, for action by the Chief of the Supply Chain Contracting Office and an appropriate corporate official; or, for other than a DLA Supply Chain,

> 2. through contracting management channels at other DLA contracting activities.

> v. Prepare a Truth In Negotiations Act (TINA) Waiver Determination and Findings, which is to:

> 1. include verbatim, the three statutorily-required findings (DFARS

> 215.403-1(c)(4)(A)(1) through (A)(3)), and

> 2. follow the guidance at DFARS 215.403-1(c)(4)(A) and DFARS PGI

> 215.403-1(c)(4)(1).

> vi. Notwithstanding the existence of a prior blanket waiver, (including those

> referenced at DFARS 215.403-1(c)(4)(C) and (D)) the contracting officer must accomplish the price analysis required by FAR 15.404-1(a) in an effort to ensure that the overall price is fair and reasonable.
> vii. Prior to forwarding the waiver request through channels to the Supply Chain HCA or, for other DLA contracting offices not designated a contracting activity (see 2.101), to the DLA HCA (J-7), the contracting officer shall:

> 1. Prepare the additional documentation supporting elevation of a supplier’s

> refusal to provide cost or pricing data and a TINA waiver if applicable, as identified in 15.404-2(d).

> 2. Coordinate, and furnish a copy of, the recommended draft TINA Waiver D&F (with attached refusal letter from the offeror’s senior manager delineating why the offeror refuses to submit and/or certify the requisite cost or pricing data) and an electronic draft spreadsheet record of the proposed TINA waiver, with the Supply Chain Cost and Price Analysis Office.

> viii. The Supply Chain Cost and Price Analysis Office is the Supply Chain focal point for reviewing and providing advice on proposed TINA Waiver D&Fs, maintaining the Supply Chain TINA Waiver Tracking Log, a copy of the proposed and approved TINA Waiver D&Fs and for emailing the Supply Chain’s Monthly Report of all Exceptional Case TINA Waivers that were in-process or executed during the month, using the J-73-prescribed TINA Waiver Spreadsheet, to the DLA J-73 focal point (jerry.gilbart@dla.mil) not later than five business days following the end of each month.

ix. Following an unsuccessful negotiation with the contractor’s cognizant senior official for:

1. The requisite cost or pricing data and subsequently, the certificate of cost or pricing data; and,

2. The contractor’s letter of refusal with rationale why the data will not be provided including, as applicable, (A) An explanation of why the data has been provided to the Government by the business segment in the past, but will no longer be provided, and/or (B) Information other than cost or pricing data to enable the supply chain contracting officer to determine the price(s) fair and reasonable,

the contracting officer should follow the guidance at 15.404-2(d) for elevating TINA refusals to the HCA.

x. Following the unsuccessful accomplishment of the steps at 15.404-2(d) for processing by the Commander/Director, Supply Chain or other contracting office, the Commander/Director, Supply Chain HCA or Chief of the Contracting Office shall promptly notify HQ DLA, ATTN: J-7, and forward recommendations to resolve the impasse. A copy of the notice elevating the matter, along with a copy of the proposed D&F and supporting documentation (including that listed at 15.404-2(d)(1) to (14)), should be forwarded electronically to HQ DLA, ATTN: J-73 by the CCO or designee, e.g., normally the chief of the Supply Chain Cost and Price Analysis Office.

> xi. Within seven working days following receipt of the complete documentation

> package, J-7 will contact the vendor and request the certified cost and pricing data or the written refusal. And, if the Supply Chain is unable to determine the prices fair and reasonable, J-7 will exhort the contractor to provide a basis the government can use to determine the price(s) to be fair and reasonable.

> xii. Once J-7 has made contact and the vendor has provided the refusal and information to enable a fair and reasonable price determination, or the vendor has re-engaged in negotiations with the contracting officer leading to fair and reasonable prices, the Supply Chain HCA can sign the waiver. If, instead, the vendor still refuses to provide documentation of its refusal, J-7 will provide written documentation of the HQ effort, and outcome, to the cognizant Supply Chain or other contracting office for its records (Including where applicable, the SPE coordination per 215.403-1(c)(4)). If the price cannot be determined fair and reasonable, spot buys may be used as a last resort to maintain customer support since the requirements for issuing the waiver cannot be met.

> xiii. When the award action has been completed or cancelled, the contracting officer shall promptly advise the Supply Chain Cost and Price Analysis Office, in writing of the action taken on the D&F; if an exceptional TINA waiver was executed by the cognizant HCA, the contracting officer shall promptly prepare and furnish to the Supply Chain Cost and Price Analysis Office, a copy of the completed J-73 electronic spreadsheet record of the TINA Waiver, along with a .PDF format copy of the completed (signed, with signature block, and dated) TINA Waiver D&F, with the attached Contractor TINA Refusal, if available. This information will be used for DLA’s quarterly report of TINA waivers to DPAP (basis of the annual OSD report (DFARS PGI

> 215.403-1(c)(4)(B).

> ).

> (C)(90) The DoD waiver of submission of certified cost or pricing data from the Canadian Commercial Corporation (CCC) (DFARS 215.403-1(c)(4)(A)) states that the integrity of the assurance of fair and reasonable prices by the Government of Canada can be assumed. However, proposal analysis is required (FAR 15.404-1). Where price analysis indicates a fair and reasonable price significantly different than that offered by CCC, the contracting officer should initiate discussions with the CCC to request confirmation of the price reasonableness determination. A brief explanation of why the confirmation is being requested, i.e., the results of the price analysis, should accompany the request.

15.403-3 Requiring information other than cost or pricing data.

(a) General

(4)(90) The Determination & Findings at FAR 15.403-3(a)(4) that it is in the best interest of the Government to make the award to that offeror:

(A) is delegable by the Supply Chain HCA to:

(i) the Supply Chain Chief of the Contracting Office (CCO), with power of

redelegation without further delegability, to one level below the Supply Chain CCO, and

(ii) the Senior Reviewing Official of a Detachment under the Supply Chain,

without power of further delegation.

(B) has been delegated to the CCO for other DLA contracting offices (see 2.101, Contracting Offices Not Designated a Contracting Activity) without power of further delegation.

> 15.403-4 Requiring cost or pricing data (10 U.S.C. 2306a and 41 U.S.C. 254b).

> (a)(1) If the contracting officer cannot determine that an item claimed to be commercial is in fact commercial or that any other TINA exception applies (FAR 15.403-1(b)(1) through -1(b)(5)) to a contract action exceeding the TINA threshold, the contracting officer shall require submission, and subsequently, certification of cost or pricing data. See additional guidance at 12.102 (90).

> (i) Pricing a contract award:

> (90) In determining whether an award action exceeds the current Truth in Negotiations Act (TINA) threshold (see FAR 15.403-4(a)(1)) for requiring cost or pricing data, use the anticipated dollar value of the award, plus the dollar value of all priced options evaluated at time of award. If the award establishes a maximum quantity of supplies or services to be acquired or establishes a ceiling price or establishes the final price to be based on future events, the final anticipated dollar value must be the highest final priced alternative to the Government for all items priced and evaluated in the award, plus the highest dollar value of all such evaluated options (See also 1.108(c)).

> (ii) Pricing a contract change or other modification (measured for TINA applicability using the TINA threshold cited in the FAR 52.215-11, -13 and -21 clauses included in the contract) (See also 1.108(c) and FAR 15.403-4(a):

> (90) The requirement to obtain cost or pricing data and subsequent certification applies to actions of the following types for one or more items of supply or services not priced at time of award, when their combined total amount using any maximum order quantities for such items calculated exceeds the TINA threshold cited in the FAR clauses in (ii) above) that are included in the contract (see FAR 15.403-4(a)(1)):

> (A) Exercise of a priced or undefinitized option for items having prices that were not evaluated at time of contract award in accordance with 17.206(b)(90), and

> (B) Definitization of an undefinitized option (See FAR 16.603 and DFARS 217.74),

> (C) Definitization of an other undefinitized contract action (see FAR 16.603 and DFARS 217.74), and

> (D) Repricing action, e.g., an actual cost type EPA, action under the Changes, Claims, Price Reopener, and Prospective Repricing clause.

> (91) The following postaward actions do not require cost or pricing data to be obtained:

> (A) Exercise of priced options for items having prices which were evaluated at time of award,

(B) Price adjustments for items under an EPA based on established prices or on cost or price index(es), and

> (C) Actions for which an exemption is applied (see FAR 15.403-1(b)(1) through (b)(3) and (b)(5)), e.g., when the price for an option is based on the price of a basic award for the same or similar item(s) for which one of the statutory exceptions apply; or when an EPA or other repricing action is based on a change in an established price (includes instances where cost or price indexes reflecting a change in a market is used), or a change in a price set by law or regulation.

> (b)(90) Contracting officers shall,

> (i) identify in solicitations, any options which are subject to the requirement to

> obtain cost or pricing data prior to exercise of the option;

> (ii) specify in solicitations where applicable, that the offeror’s certificate must specifically identify, the evaluated option having price(s) covered by the certificate;

> (iii) identify in solicitations and resulting contracts any options expected to exceed the TINA threshold included in the contract which the contracting office does not plan to include in the preaward pricing evaluation and stipulate that as a prerequisite of exercise, they are subject to the submission and certification requirements of P.L. 87-653 as implemented by the applicable clause (FAR 52.215-20 or 52.215-21, whichever will be included in the contract); and

> (iv) coordinate with the Supply Chain Cost and Price Analysis Office as soon as pricing assistance is needed IAW 15.404-1(a)(90)(1)(i) or (ii).

> 15.403-4(b)(91) Cost or pricing data for indefinite quantity and requirements contracts.

> FAR 16.503 and 16.504 state that estimated total quantities to be ordered under requirements and indefinite quantity contracts respectively should be as realistic as possible. This information, along with the estimated number of orders and variability in order quantities, is required for realistic contract pricing. To avoid delays when contract price data must be obtained under these types of contracts, the solicitation should provide this information and specify that--

> (1) It should be used by the offeror in developing the unit price(s) proposed;

> (2) The price proposal must include an explanation of the production quantity and period used in developing the proposed unit price(s) (The planned production quantity may be greater than, equal to, or less than the maximum quantity of an indefinite quantity contract/total estimated quantity of requirements contract, exclusive of any contract options.); and

(3) The offeror is requested to quantify any reduction in the offered unit price(s) available if the minimum order quantity were raised and/or a guaranteed minimum contract quantity established.

> 15.403-5 Instructions for Submission of Cost or Pricing Data or Information Other Than Cost or Pricing Data.

> (b)(2) Solicitation instructions for submission of cost or pricing data shall include or incorporate by reference in Section L, the Table 15-2 general instructions, cost elements and format requirements specified at FAR 15.403-5(b)(1) and shall require identification of decrement factor information, defined at 15.401, as part of the data submission requirements.

> 15.404 Proposal analysis.

> 15.404-1 Proposal analysis techniques.

> (a) General.

> (90) The cost/price analysis element shall provide:

> (1) A price or cost/price analysis report, as appropriate, for:

> (i) all sealed bid acquisitions of $550,000 or more where a sole responsive bid is received, and

> (ii) all negotiated acquisitions (including awards to the Canadian Commercial Corporation) of $550,000 ($200,000 for FPI (see 8.602(a)(91)(iii))) or more, where adequate price competition was not received (see FAR 15.403-1(c)(1)(i)), unless the contracting officer performs a price analysis (including, for rebuys, a comparison to prices paid for the same item in accordance with 15.404-1(b)) which documents that the price is fair and reasonable and is:

> (A) based on adequate price competition (FAR 15.403-1(c)(1)(ii) or (iii)),

> (B) set by law or regulation (FAR 15.403-1(c)(2)), or

> (C) for a commercial item (FAR 15.403-1(c)(3)).

> (2) A price analysis or cost/price analysis, as appropriate, for any other acquisition where assistance is deemed necessary by and requested by the contracting officer.

> (3) Recommendations and coordination on all planned actions involving the "resolution" and "disposition" (see 15.406-3(b)(91)b(2) and (3) respectively) of defective pricing and other "reportable" audits, and instances of suspected overpricing.

> (4) All reports of reviews covering multiple line items shall include comments on the results of an assessment for unbalanced bids or offered prices (FAR 15.404-1(g)).

> (91) The contracting officer (the price analyst and/or value engineering/other technical specialist when requested to furnish an analysis of the proposal}, shall identify or have identified from existing data bases and/or files, any independent Government estimate (IGE){"should cost") that had been performed; and include in the proposal evaluation report and prenegotiation briefing memorandum, comments as to the extent of utility of the IGE results as analytical or corroborative information for determining price reasonableness, establishing negotiation objectives, and for contract negotiations.

(92) If the contracting officer determines that a procurement is for an item that meets the commercial item definition at FAR 2.101, the contracting officer cannot determine the offered price to be fair and reasonable on that basis alone. Some form of proposal analysis is also required.

> (b) Price analysis.

> (90) Whenever cost or pricing data or commercial item exemption data is obtained, the analysis shall also address the reasonableness of the offered price in comparison to prior prices paid for the item.

(2)(ii) When a comparison or trend analysis to prior prices is used, the rationale and amount of allowance (negative, zero, or positive adjustment) for each factor cited in the FAR shall be included in documentation of the price reasonableness determination, along with a statement of how these prior prices were determined reasonable. The contracting officer must consider the nature of the Government’s requirement (e.g., quantities being acquired, how the item is managed) compared with the circumstances under which prices were paid by another customer (e.g., quantities being acquired, whether an urgent requirement drove the price up). The contracting officer should take maximum advantage of the Government’s potential purchasing power and should expect terms and prices at least equal to those available to commercial or other customers that have similar size and influence in the market.

(2)(iv) When a price appearing in a contractor catalog or price list is utilized to determine price reasonableness, the contracting officer shall include in the reasonableness determination documentation of the steps taken in confirming that the price list is current and depicts prices at which sales are currently being made or were last made. See 12.102(90) for guidance on determining if a procurement is for an item that meets the commercial item definition at FAR 2.101.

(2)(v) However, the standard price, the material acquisition unit price (MAUC) (unless based on recent purchases and escalated to the intended award date), budgetary estimates, and provisioning estimates are invalid bases for comparative price analysis and price reasonableness determinations.

> (c) Cost analysis.

> (90) When a contractor catalog or other price developed using proposed, recommended, or approved forward pricing rates, factors, and/or a formula pricing methodology is utilized to determine price reasonableness, the contracting officer shall include in the price reasonableness determination documentation of the steps taken in confirming that the rates and factors and/or formula pricing methodology and catalog prices are current and have been reviewed and determined reasonable, the review date, and the office accomplishing that review (i.e., normally the field ACO). Use of this technique also requires documentation that the direct material quantities/prices, direct labor hours, and/or other bases against which the rates and factors are applied have been reviewed and determined reasonable.

> (c)(2)(iii) The comparison may be to actual costs incurred for the same item or for a similar item (with any necessary adjustments to achieve comparability of market conditions, quantities, time periods, and terms and conditions) by the same or another supplier.

> 15.404-2 Information to support proposal analysis.

> (c) Audit assistance for prime contracts and subcontracts.

> (90) For price proposals involving significant subcontracted amounts, requests for field pricing reviews should solicit decrement factor information (see 15.401) relevant to the award. Where extreme urgency necessitates award prior to completion of a subcontract review, negotiation of an appropriate decrement would obviate the need for a reopener clause (see DFARS 215.407-5-70(g)(2)(vi) or an undefinitized contractual instrument.

> (d) Deficient proposals. When the offeror refuses to submit or certify cost or pricing data the reasons why the data are needed and why they were not provided should be discussed with the offeror and confirmed in writing prior to elevation to higher Government and offeror management levels.

> (90) In the event the efforts of the contracting officer and higher management are unsuccessful in obtaining the data, the matter shall be elevated, after review by the local pricing and contract review elements, to the Supply Chain Head of the Contracting Activity (HCA) along with the information in (1) through (14) below:

> (1) What steps were taken to:

> (i) Secure essential cost or price data.

> (ii) Secure the contractor's cooperation, and

(iii) Assure the contractor that the information furnished by the contractor would be adequately safeguarded.

> (2) An explanation as to why an exemption cannot be based on current or recent prices for a similar item or any of the other bases for exemption (FAR 15.403-1(b)(1) through (b)(3) and (b)(5)) to the requirement for cost or pricing data.

(3) The offeror's written refusal to provide the cost or pricing data and reason for the refusal (if unavailable, documentation of a telephone contact with a senior executive explaining why the contractor refuses to provide a written refusal).

> (4) An explanation from the senior company official if possible, of whether, and under what circumstances, the offeror’s business segment furnished cost or pricing data for prior contracts with this or another Government contracting office.

> (5) The identification and results of attempts (including, where applicable, attempts made by the auditor, the ACO, and other contracting offices) to secure cost or pricing data concerning the current and prior contract actions, including date(s), contract award(s), and the names, organizational level, job titles and phone numbers of participants in the negotiations.

> (6) A complete buy history for the five item(s) expected to represent the highest Government expenditures under the proposed contract action.

> (7) A copy of the cost or price analyses performed, which shall include a comparison with prior prices, and results of the price reasonableness determination.

(8) Substantiation that the item is mission essential.

> (9) The current stock position, projected requirements, schedule of due-in’s, schedule of unfilled orders, and projected stock recovery date.

> (10) Non-technical description of the item, including dimensions, and the next higher

> Assembly and the end item/weapon system it’s included in.

> (11) Photograph (e.g., from a tech manual) or drawing of the item.

> (12) The alternatives to proceeding with the acquisition.

> (13) The suggested course of action considering the alternatives in (12) above.

> (14) Realistic plan for avoiding, as applicable, another proposal deficiency or TINA refusal in the future.

● (91) Negotiations with top management of the firm conducted by the CCO, Supply Chain HCA and, as appropriate, by the Supply Chain Commander/Director. When a contractor/subcontractor has refused to provide the required data for the first time, or when the Commander/Director or Supply Chain HCA has not personally negotiated with the contractor/subcontractor recently to obtain such data, the Commander/Director or Supply Chain HCA should attempt to secure the data. The Commander/Director or Supply Chain HCA shall execute a detailed memorandum setting forth the rationale for any decision not to personally negotiate for the data. This memorandum shall be included in the contract file, along with the above information.

(92) Following an unsuccessful negotiation where the extended dollar value of the award or other contract action (15.403-4) exceeds the TINA threshold (current value or value in the contract as applicable), the Commander/Director, Supply Chain HCA, or Chief of the Contracting Office for those contracting activities without a Supply Chain HCA, shall promptly notify HQ DLA, ATTN: J-7, and forward recommendations to resolve the impasse, with supporting documentation ((1)-(14) above), to HQ DLA, ATTN: J-73.

(93) See 15.403-(c)(4)(A)(90)(x) for this further elevation to continue efforts to secure TINA data and/or certification covering the offered price including, where required, subcontractor cost or pricing data and/or certification, or other information to determine price reasonableness of a contract action exceeding the TINA threshold, or a clear refusal to provide and/or certify the total price offered with rationale explaining the refusal.

> 15.404-4 Profit.

(c) Contracting officer responsibilities.

> (2)(c)(2) Approval of an alternate structured approach required for other than awards cited in DFARS 215.404-4(c)(2)(C)(1) may be redelegated not lower than the chief of the contracting office. The DSCR Chief of the Contacting Office may further delegate this authority to the Deputy Director, Supplier Operations (Contracting) and the Chief, Base Support Division, without power of redelegation. Promptly upon execution, a copy of each approval shall be furnished to HQ DLA, J-73.

> (2)(e)(70) Include documentation of the rationale and derivation of the profit factors and amounts on the DD Form 1547 approved at the time of the prenegotiation briefing in the prenegotiation briefing memorandum or attach it thereto, e.g., as a separate attachment or as part of the price/cost analysis report.

15.404-73 Alternate structured approaches.

> (c)(1) The DD Form 1547, Record of Weighted Guidelines Application, shall be used whenever an alternate structured approach is utilized. When a zero weight is assigned to one or more of the factors specified in DFARS 215.404-71-1(a) or additional factors are utilized, complete rationale shall be documented.

> 15.404-71-4 Facilities capital employed.

(b)(2) See DFARS 215.404-71-4(b)(2) for the treatment of Facilities Capital Cost of Money on production special tooling and production special test equipment.

15.405 Price negotiation

(a)(90) Occasionally, the price is not as close to the negotiation objective as the contracting officer would like, but it cannot be judged unreasonable. In such cases, the file should contain a positive statement that the price is either considered fair and reasonable under the circumstances or cannot be determined reasonable, and enumerate the circumstances. For every price reasonableness determination, the contracting officer should accomplish price or cost/price analysis, as necessary, to determine the price either to be reasonable or unreasonable. The offeror's refusal to provide and/or certify cost or pricing data or information other than cost or pricing data does not relieve the contracting officer from the requirement to perform a proposal analysis; nor does such refusal provide a sufficient basis for determining the price unfair or unreasonable.

(d)(90) The referral of a contract action to higher authority for resolution of a price, profit or fee that the contracting officer deems to be unreasonable may be any level above the contracting officer, including the Commander (Administrator, DNSC and Director, DAPS). For estimated awards over $550,000 where an offeror refuses to provide cost or pricing data required pursuant to FAR 15.403-4, and/or a price that can be determined fair and reasonable, the chief of the contracting office shall personally negotiate with the offeror or contractor in an attempt to secure cost or pricing data and/or delete those elements of the offer that render the price unreasonable. If unsuccessful, a detailed memorandum setting forth the results shall be forwarded with the referral to the head of the contracting activity for appropriate action. (See 15.404-2(d)).

> 15.406 Documentation

> 15.406-1 Prenegotiation objectives.

> (b)(90) Whenever it is decided that the contract auditor will not be participating in the prenegotiation and/or price negotiation meeting for a contracting action which involved an audit, the contracting officer shall document in the prenegotiation briefing memorandum (PBM) and/or price negotiation memorandum (PNM), as applicable, the results of discussions with the auditor or other basis for such decision.

(b)(91) Prior to the beginning of any contract price negotiation, the award of a competitive negotiated contract, or the disposition of any other recommended contract action cited below, a briefing of the proposed negotiation, award, or settlement shall be presented to the chief/acting chief of the contracting office (CCO) for approval:

(1) Every award exceeding $25,000 ($100,000 for ICPs) of a letter contract, undefinitized BOA order or other undefinitized instrument. (The responsibility in paragraph (b)(91) above is delegable only for awards that do not exceed $250,000 (ICPs only), without power of redelegation, to one level (two levels for ICPs) below the CCO, and, for ICPs only, any other awards for filling a backordered or nonstocked requirement meeting DLA's criteria for heightened management (see 17.7404-1(a));

(2) Every definitization exceeding $100,000 ($250,000 for ICPs) of a letter contract, undefinitized BOA order, or other undefinitized instrument. (For ICPs only, the responsibility in paragraph (b)(91) above is delegable, without power of redelegation, to one level below the CCO when the contract action does not exceed $550,000);

> (3) Every other negotiated contract pricing, repricing and final pricing action that exceeds $100,000, ($550,000 for the ICPs). (For other than ICPs, the responsibility in paragraph (b)(91) above is delegable, without power of redelegation, to one level below the CCO when the contract action does not exceed $250,000. For ICPs, to one level below the CCO; two levels when the action does not exceed $1,000,000);

> (4) "Resolution" of reports of defective cost or pricing data and other "reportable" audits (see 15.406-3(b)(91)(b)(1)). (For ICPs only, the responsibility in paragraph (b)(91) above is delegable, without power of redelegation, to two levels below the CCO if the value of the action does not exceed $100,000); and

> (5) Any action not cited in (1) thru (4) above which requires HQ DLA (DIRECTOR, ACQUISITION MANAGEMENT (J-7)) review and approval. (The responsibility in paragraph (b)(91) above is delegable, without power of redelegation, to one level below the CCO.)

> Note that pursuant to (1)-(5) above, (a) delegees must occupy a supervisory chief or deputy chief position at the immediately lower organizational (not procurement functional) level (or, for ICPs, at the either the first or second lower organizational level) and be certified at Level III in the Contracting Acquisition Career Field; (b) chief and their deputy/deputies are deemed to be at the same organizational level; and (c) dollar value determinations shall be made IAW 1.690-6(a).

(b)(92) At a minimum, the briefing shall cover:

> (1) The acquisition situation, including any unique features.

> (2) Previous price history.

> (3) Where price negotiations are contemplated, the analytical methods utilized in establishing the prenegotiation objectives (i.e., price, improved delivery schedule, etc.):

> (i) For proposals not involving cost or pricing data or a cost breakdown, discuss and include a written schedule showing the buildup of the offeror's price and any significant differences between the proposed price negotiation objectives (i.e., minimum, target, and maximum prices, and the proposed price, and any audit, ACO, or cost/price analyst recommendations. Also discuss when there are dissimilarities between the item or quantity offered and the commercial item for which a catalog price exists;

> (ii) For acquisitions to be awarded based on cost or pricing data, or cost realism data, discuss the buildup of the offeror's price by element of cost and profit, and any significant differences between the proposed price negotiation objectives (i.e., includes minimum, target, and maximum objectives for costs, profit, fee, and price) and the contractor's proposed price, audit findings, technical report comments, ACO recommendations, and cost/price analyst recommendations, together with rationale supporting the overall price negotiation objectives. Include a comparative schedule showing each element of cost and profit included in the contractor's proposal; the recommendations contained in the audit, technical, and field pricing reports; any independent Government estimate (IGE), the cost/price analyst's recommendations; and the price negotiation objectives.

(iii) Negotiation plan (i.e., phone or in person).

> (iv) Anticipated negotiation problems (e.g., contingencies, required deletions or changes in contract clause, etc.) and proposed solutions.

> (4) Where price negotiations are not contemplated, the analytical methods utilized in determining price reasonableness:

> (i) If award is to be made as a result of initial competitive offers received, include a written schedule comparing the offerors' prices, price history, and any IGE.

> (ii) If award is to be made following BAFOs received, address the nature and results of discussions and offers, include a written schedule comparing the initial offers and BAFOs if exemption data or cost/cost realism data are obtained, also include the requirements (excluding prenegotiation price objectives) of (3)(i) or (3)(ii) above respectively.

> (iii) If award is to be made based on competitive prices of current or recent awards for the same or comparable items, include a written schedule comparing the offered prices to such recent competitive award prices and any IGE.

> (iv) For other sole offers, include a written schedule showing the price for each line item (and offeror's buildup by element of cost and price, if known, with a written comparison to any significant differences in the audit findings or review recommendations).

> (b)(93) A memorandum summarizing the principal elements of the briefing prenegotiation objectives, the attendees, and the results of the briefing (including any significant comments or specific recommendations made by briefing attendees) and attaching the price schedule used in the briefing, shall be prepared for signature by the approving official.

> (b)(94) The appropriate prenegotiation approval authority or delegee, shall be notified of the need for any significant change in negotiation objectives. A copy of the approval of revised price objectives shall be made an attachment to the PBM.

> (b)(95) The following are exempt from the requirement for prenegotiation/preaward briefings:

> (1) Perishable subsistence acquisitions.

> (2) Subsistence commodity market items that are subject to marketing exigencies, such as coffee, flour, and salad oil.

> (b)(96) The following exceptions are authorized to the requirements for a prenegotiation briefing to the official specified at 15.406-(b)(91):

(1) DESC petroleum acquisitions not involving a cost proposal audit, that consist entirely of unrelated line items that are consolidated solely for administrative purposes. The briefing in such cases may be conducted at a level lower than the chief of the contracting office when no single line item is valued $200,000 or more, even though the total acquisition is valued $500,000 or more.

> (2) For DSCP, subsistence actions cited at 15.406-1(b)(91) may be delegated, regardless of dollar value, by the chief of the contracting office to the Defense Subsistence Region commanders, with redelegation authorized to the purchasing division chiefs.

(3) Orders against Federal Supply Schedules or mandatory orders placed under the Javits-Wagner-O'Day Act (FAR Subpart 8.7).

> 15.406-3 Documenting the negotiation.

> (a) While excessive detail should be avoided, the PNM, standing alone, must convince all reviewers that the price negotiated (or awarded without negotiations) was reasonable, given the circumstances of the particular acquisition. Although the content will vary depending on the magnitude of the contract, contract type, cost or pricing data obtained, the extent of negotiations, etc., a standard format should be used. The PNM should have the following subdivisions: "Subject," "Introductory Summary," "Particulars," "Procurement Situation," "Negotiation Summary," and "Miscellaneous." For acquisitions involving cost or pricing data, the Negotiation Summary shall include a schedule reflecting each element of cost and profit in the contractor's proposal, the approved negotiation objectives, any revised proposal or negotiation objective, and the final negotiated amount. A copy of the PBM, along with any changes thereto, shall accompany and be listed as an attachment to the PNM.

> (11) The price reasonableness determination shall be documented in the contract file and in appropriate automated price history records (e.g., SAMMS price reasonableness codes). It is essential to accurately complete the price reasonableness codes, because when conducting price analysis on future proposed prices for the same or similar items, the contracting officer cannot consider a comparison of prior contract prices with current proposed prices to be valid if the prior price was unreasonable (see FAR 15.404-1(b)(2)(ii).

> (b)(90)(1) A copy of the PNM shall also be furnished to the local cost/price analyst, value engineer, and/or other technical specialist that was involved in any price review or negotiation.

> (b)(90)(2) When an IGE was furnished for assistance in proposal evaluation, the contracting officer should assure information on its utility is included in the Contracting Technical Data File and any other local data bases for future reference. Additionally, the contracting officer should forward this information, along with any specific suggestions based on lessons learned on the buy, to the office(s) preparing and furnishing the IGE.

15.407 Special cost or pricing areas.

> 15.407-1 Defective cost or pricing data.

> (b)(7) The 26 U.S.C. 6621 quarterly interest rate cited in the corresponding FAR paragraph, is published in an Internal Revenue Bulletin the Federal Register during the third week of March, June, September and December. The annual rate for the forthcoming quarterly period and information on its application is available on the DLA Pricing Webpage at http://www.dla.mil/j-3/j-336/Pricing/Default%20test.asp .

> (d)(90) If, following review by the pricing element and legal (see 1.691(a)) and approval in accordance with 15.406-1(b)(91), the contracting officer's planned settlement objective is less than 70 percent of the amount reported by the GAO, DoD IG, or DCAA, a copy of the approved briefing memorandum, including the audit and pricing reports and other relevant documentation (see 15.406-1(b)(91)(5) and (93)), shall be furnished for receipt in HQ DLA, ATTN: J-73 at least 10 working days prior to initiating settlement action with the contractor.

> 15.407-5 Estimating systems.

Refer to DFARS 215.407-5-70, Disclosure, maintenance, and review requirements, 215.407-5-70(g)(2)(vi) and (3). See also subpart 17.92.

(b)(91) Follow-up on contract audit reports.

(a) Responsibility of the chief of the contracting office. The contract follow-up official for DLA contracting offices (the Director, Acquisition Management, (J-7) ) has designated the chief of the contracting office as the official responsible for full and effective implementation of the requirements of DoDD 7640.2, Policy for Follow-up on Contract Audit Reports (http://www.dtic.mil/whs/directives/corres/html/76402.htm ). A local contract audit focal point (the cost/price analysis element, where one exists) shall be established to assist in discharging the tracking and reporting requirements of the Directive.

> (b) Responsibilities of contracting officers.

> (1) Promptly upon receipt of a contract audit report involving indirect cost rates, defective pricing, incurred costs, final pricing, terminations, claims, cost accounting standards, and reviews of a contractor's system the contracting officer shall furnish a copy of the report to the local contract audit followup focal point, and, if "reportable" (see DoDD 7640.2, paragraph F.3.), a detailed milestone plan for timely "resolution" and "disposition" . Updated milestone plans, reflecting the actual dates milestones were achieved and revised target dates, shall be forwarded to the local contract audit follow-up focal point at the time any milestone is achieved or missed.

> (2) Contracting officers shall "resolve" any differences between their planned action and that recommended by the contract audit activity for all "reportable" audits. The contracting officer shall accomplish the required "resolution" promptly, and in no case later than 6 months following issuance of the audit report (P.L. 96-527). "Resolution" occurs upon approval obtained, in accordance with local review procedures, of the planned negotiation/settlement objectives.

> (3) The contracting officer shall endeavor to accomplish disposition of all audit reports as soon as possible after "resolution." "Disposition" should normally occur within 12 months following audit report issuance. As stated in Enclosure 1 to DoDD 7640.2 a reportable audit is closed when "disposition" occurs, i.e.:

> (i) The contractor implements the audit recommendations of the contracting officer's decision; or

> (ii) The contracting officer negotiates a settlement with the contractor and a contractual document has been executed; or,

> (iii) The contracting officer issues a final decision pursuant to the Disputes Clause, and 90 days elapse without contractor appeal to the Armed Services Board of Contract Appeals (ASBCA). (Should the contractor appeal to the Claims Court within the 12 months after final decision, the audit must be reinstated as an open report in litigation); or

> (iv) A decision has been rendered on an appeal made to the ASBCA or U.S. Claims Court and any corrective actions directed by the Board or Court have been completed and a contractual document has been executed; or

> (v) Audit reports have been superseded by, or incorporated into, a subsequent report; or

> (vi) Any corrective actions deemed necessary by the contracting officer have been taken, so that no further actions can be reasonably anticipated.

(4) In addition:

> (i) Upon completion of the "disposition" action, the contracting officer shall promptly furnish a memorandum of actions taken to the local contract audit follow-up focal point, the ACO, and to the auditor (DoDD 7640.2, paragraph F.5.a.).

(ii) When award does not result to the contractor whose offer was subject to a preaward audit report (due to cancellation, award to a competitor, etc.), the contracting officer shall promptly provide written notification to the local contract audit follow-up focal point, the ACO, to the auditor (DoDD 7640.2, paragraph F.5.b.).

> (c) Responsibilities of contract audit follow-up focal points. The contract audit follow-up focal point is responsible for tracking and reporting the status of audit reports as specified below:

(1) Tracking every contract audit report, excluding "nonreportable audits," using milestone status information furnished by the contracting officer. The current status of each action is to be maintained in a log or similar document that includes all information required by the semiannual contract audit follow-up status report.

> (2) Preparing the semiannual report spreadsheets of "open" and "closed" audits (formats in DoDD 7640.2) in MS Excel for submission by the chief of the contracting office and receipt in HQ DLA, ATTN: J-73, not later than 10 April and 10 October of each year, along with a current milestone chart on each open audit (see 15.406-3(b)(91)(c)1)). Negative reports are required. Electronically transmit a copy of the report spreadsheets to jerry.gilbart@dla.mil .

15.408 Solicitation provisions and contract clauses.

> (l) Requirements for cost or pricing data or information other than cost or pricing data. Reserved. (See 12.301(f)(93).)

> (m) Requirements for cost or pricing data or information other than cost or pricing data – Modifications. Reserved. (See 12.301(f)(93).)

15.408-90

(a) Insert 52.215-9013 in solicitations and contracts where the contractor is producing goods at one or more facilities.

> (b) Insert the clause 52.215-9021 in all DoD EMall solicitations and contracts.