# DLAD PGI

- SUBPART 15.4 – Contract Pricing

- PGI 15.406-1 Prenegotiation Objectives.
- PGI 15.406-3 [CH22] Documenting the negotiation

Contracting by Negotiation

SUBPART 15.4 – Contract Pricing

PGI 15.406-1 Prenegotiation Objectives.

Procedures for Resolving Audit Disagreements
1. Applicability: Contract Proposals valued at $10 million or more.

2. Definition: Significant Disagreement – The situation that occurs when the contracting officer’s prenegotiation objective plans to sustain less than 75 percent of the total recommended questioned costs in the DCAA audit report. This does not include costs classified as “unsupported” in the audit report.

3. Contracting officers are charged with making informed decisions utilizing the advice of specialists in audit, law, engineering, etc., to ensure we fulfill the requirements of our warfighters while obtaining the best business deal for the taxpayers. While the contracting officer and the auditor may not necessarily agree on every issue, it is expected that they will work together recognizing that it is the contracting officer’s ultimate responsibility to determine fair and reasonable contract value. This PGI establishes the DLA procedures for attempting to resolve significant disagreements in accordance with DoD policy.

4. Resolution of Contract Audit Disagreements

a. Prior to establishing the prenegotiation objectives, the contracting officer shall discuss the results of the audit report with the auditor to attempt to resolve disagreements.

b. The contracting officer shall document the results of the discussion with the auditor and the reasons for disagreement with specific elements of costs questioned by DCAA.

c. Approval of the prenegotiation objectives memorandum in accordance with local procedures confirms that the discussion with DCAA and the contracting officer’s basis for deviating from the audit recommendations has been adequately documented and supported.

d. If the approved prenegotiation objectives memorandum does not plan to sustain at least 75 percent of the total audit recommended questioned costs, the contracting officer shall notify the auditor in writing (email notification is acceptable). The notification will require DCAA to advise within 3 days if a higher level management review is requested. If DCAA confirms (in writing) to the contracting officer that a higher level review is requested, the contracting officer will provide the contact information of the higher level review authority (the HCA) and begin planning for discussions. Concurrent with providing the higher level review information to the auditor, the contracting officer shall notify their HCA through their chain of command that a higher level review has been requested by DCAA (activities for which J-7 is the HCA shall notify the J-73 Division Chief who notify the J-7 Director). After all parties have been notified of the request for a higher level review, it is within the discretion of the contracting officer and his/her chain of command to decide whether negotiations should proceed or be suspended pending final resolution of the disagreement.

e. Concurrent with notification to their HCA, DESC, DSCC, DSCP and DSCR contracting officers shall also notify the J-73 Division Chief of the request for higher level review. J-73 will track the frequency and disposition of audit resolution issues.

f. At the HCA level, a review will attempt to determine if the auditor’s and the contracting officer’s positions can be reconciled. The contracting officer shall document the disposition of the higher level review of the disagreement(s) in a memorandum for the contract file.

g. If the HCA is other than J-7 and is unable to resolve the differences with DCAA, the approving authority shall notify J-73 with copies of the contracting officer’s documentation of the issue. In turn, J-73 shall inform the Director of Acquisition Management, J-7, of the unresolved audit and the possibility of discussions with the DCAA Director prior to any DCAA referral to the Director, Defense Procurement and Acquisition Policy.

PGI 15.406-3 [CH22] Documenting the negotiation

(11) The Price Reasonableness Code (PRC), a two position code incorporated into DLA’s Enterprise Business System, consists of a first position Reviewer Code and a second position Type Analysis Code, as follows:

First Position: | Reviewer Code: |
B | Buyer Analysis only.
C | Complete Pricing Support to buyer (field cost/price analysis, audit and/or technical reports included as part of the pricing branch's report).
F | Field Pricing Support to buyer. (One or more---field cost/price analysis, audit and/or technical review).
P V X | Local Contract Pricing Office Support to buyer (Does not include field audit, pricing or technical assistance reports). Local Value Engineering Office support to buyer. Price reasonableness determination not required/accomplished by the automated purchase procedure used; because the award was an unpriced/undefinitized action; or because the price was definitized by the field ACO and the basis of the PRD is unavailable. Use with Type Analysis Codes W and X only.
Second Position: | Type Analysis Code:
Instant buy price(s) determined reasonable because of:
A | Adequate price competition from at least two independent manufacturers of the item.
B | Adequate price competition involving at least one manufacturer plus at least one independent non-manufacturing source for the item or involving two or more independent non-manufacturing sources.
C | Catalog priced item sold in substantial quantities to the general public.
D | Market priced item sold in substantial quantities to the general public.
E | Item price set by law or regulation.
F | Cost analysis of offeror’s/contractor’s (for UCA definitizations) cost or pricing data (For exclusive distributors/dealers and other non-manufacturers, such cost analysis must include review of manufacturing costs from their source of supply.).
G | Price comparison to prior price(s) determined reasonable via price analysis. |
H | Independent Government cost estimate.
I | Other cost analysis or price analysis technique(s) (includes reviews of limited cost data)
Instant buy price(s) determined reasonable based on comparison to:
J | Adequate price competition occurring in a recent procurement in comparable quantities, terms and conditions for the same item where quotes/offers were received from at least two independent manufacturers of the item.
K | Adequate price competition occurring in a recent procurement in comparable quantities, terms and conditions for the same item where quotes/offers were received from one manufacturer plus at least one independent non-manufacturing source of the item or from two or more independent nonmanufacturing sources.
L | Adequate price competition occurring in a recent procurement in comparable quantities, terms and conditions for substantially the same item where quotes/offers were received from at least two independent manufacturers.
M | Adequate price competition occurring in a recent procurement in comparable quantities, terms and conditions for substantially the same item wherein quotes/offers were received from either one manufacturer plus at least one independent non-manufacturing source of the item or from two or more independent non-manufacturing sources.
N | Catalog price for the same item sold in substantial quantities to the general public.
O | Catalog price for substantially the same item sold in substantial quantities to the general public.
P | Market price for the same item sold in substantial quantities to the general public.
Q | Market price for substantially the same item sold in substantial quantities to the general public.
R | Item price set by law or regulation.
S* | Analysis of cost and pricing data submitted by the offeror for a recent buy of the same item (including ACO approved Government parts catalogs and formula arrangements covering parts for which a TINA waiver was not granted).
T* | Analysis of cost or pricing data submitted by the offeror of a recent buy of substantially the same item (including ACO approved Government parts catalogs and formula pricing arrangements covering parts for which a TINA waiver was not granted).
Instant buy price(s) not determined reasonable:
U | Price determined unreasonable.
V | Price could not be determined reasonable.
W | Price reasonableness determination not required/accomplished because of a UCA award, or is unknown because the price was definitized by the field ACO and the basis of price reasonableness determination is unavailable. Use with Reviewer Code X only.
X | Price reasonableness determination not required/accomplished by the automated purchase procedure used. Use with Reviewer Code X only.

* Restricted to noncompetitive negotiated contract actions not exceeding the Truth in Negotiations Act Threshold (FAR 15.403-1(b)(4)) unless cost or pricing data and

certification are obtained for the new buy or the offeror identifies its previous

cost or pricing data submission and certifies it is still current, accurate and

complete for purposes of pricing the current contractual action.