# DLAD PGI PART 15

- SUBPART 15.4 CONTRACT PRICING [F18]

- PGI 15.402-90 Reporting Requirements for Purchases from Exclusive Distributors/Dealers
- PGI 15.402-91 Procedures for performing price analysis on commercial catalogs to be added to DoD EMALL.
- PGI 15.402-90 Instructions for completing form “Reporting Requirements for Purchases from Exclusive Distributors/Dealers”.

- 15.402-92 [CH20]Sole-Source Items Subject to Limited Competition

- PGI 15.402-92 Acquisitions for Sole-Source Items Subject to Limited Competition. Contracting officers shall use the following guidelines in making the determination required by 15.402-92(a):

SUBPART 15.4 CONTRACT PRICING [F18]

PGI 15.402-90 Reporting Requirements for Purchases from Exclusive Distributors/Dealers

PGI 15.402-91 Procedures for performing price analysis on commercial catalogs to be added to DoD EMALL.

The contracting officer shall use the procedures below as applicable when adding a new commercial catalog to DoD EMALL, adding additional items to existing catalogs, or renewal of such a catalog.

(a) The offeror should provide unit prices for all catalog items in an electronic format that can be sorted in Excel from high to low dollar amounts.

(b) The offeror must describe the basis or methodology for determining how prices in their catalog were established. This information may include, for example, evidence of prices on a GSA schedule held by the contractor, evidence of commercial sales at the prices quoted, invoices from suppliers, and the overhead and profit factors added by the contractor to derive the catalog price. This information will be reviewed and discussed in the price negotiation memorandum.

(c) If the proposed catalog is extremely voluminous, consider requesting the vendor to separate it into manageable segments and award the segments separately.

Type of EMALL Commercial Catalog Contract | Pre-award Price Reasonableness Determination | Post-Award Price Reasonableness Determination
New Catalog | For items selected for 100% review using stratification, the contracting officer will perform price analysis using the techniques in FAR 15.404-1(b) to determine the price reasonableness of each item evaluated. For any item selected for 100% review where the Contracting Officer is unable to determine that the price is fair and reasonable, the item will be prohibited from being ordered, until either the vendor revises the offered price to a fair and reasonable price or adequately justifies to the contracting officer’s satisfaction that the price is fair and reasonable. The contracting officer shall select a statistically valid sample of remaining catalog items (using DCAA EZ Quant software) and perform price analysis on the items in the sample using techniques listed at FAR 15.404-1(b) to determine general reasonableness of the catalog prices. The sample should be selected to produce a 95% confidence level with a presumed error rate of 10%. The random number feature of DCAA EZ-Quant software shall be used to ensure that no personal bias or subjective consideration is used in selection of the catalog items to be evaluated. The EZ-Quant physical unit sample selection option shall be used to select a physical unit sample. The EZ-Quant dollar unit sample selection option shall be used to select a dollar unit sample. | The contracting officer will perform a post award review of those items which are being ordered by EMALL customers in large dollar amounts (i.e., more than $25,000 in a fiscal year), and that were not selected for review during the pre-award sampling process. This procedure shall be supplemented by performing a statistical analysis similar to that performed in the pre-award phase for other items not examined during the pre-award sampling process.
New Catalog | When selecting items for comparison or developing the aggregate comparison price the contracting officer shall first use the price analysis techniques discussed in FAR 15.404-1(b). These include(i)Comparison of proposed prices received on the solicitation such as catalogs for similar items. (ii) Comparison of previously proposed prices and previous Government and commercial contract prices for the same or similar items, (if both the validity of the comparison and the reasonableness of the previous price(s) can be established. (iii)Use of parametric estimating methods/application of rough yardsticks (such as dollars per pound, or per horsepower, or other units) to highlight significant inconsistencies that warrant additional pricing inquiry) (iv) Comparison with competitive published price lists, published market prices of commodities, and similar indexes). (v) Comparison of proposed prices with Independent Government Cost Estimate (IGCE). (vi) Comparison of proposed prices with prices obtained through market research for the same or similar item. If none of these price analysis techniques provides an adequate comparison then the contracting officer shall request other than certified cost and price data and perform cost analysis using techniques discussed in FAR 15.404-1(c). If the comparison reveals that the vendor’s total proposed aggregate price (for all items in the statistical sample) to be less than the total aggregate price that the contracting officer’s (CO) used in their price reasonableness comparison (for the same or similar items) then no action needs to be taken on the universe of items not selected for review. However, the contracting officer needs to take action on any individual item in the statistical sample exceeding the CO’s determination of fair and reasonable prices as outlined below. If the comparison reveals that the vendor’s total proposed aggregate price (for all items in the statistical sample) exceeds the total aggregate price that the contracting officer’s (CO) used in their price reasonableness comparison (for the same or similar items) then the CO will negotiate a reduction to the entire universe of items. The CO will also address any individual items exceeding the CO’s determination of fair and reasonable pricing as outlined below. For any item in the catalog where the Contracting Officer is unable to determine that the price is fair and reasonable, the item will be prohibited from being ordered, until either the vendor revises the offered price to a fair and reasonable price or adequately justifies to the contracting officer’s satisfaction that the price is fair and reasonable. |

Type of EMALL Commercial Catalog Contract | Pre-award Price Reasonableness Determination | Post-Award Price Reasonableness Determination for new items added to catalog.
New items added to catalog after initial price reasonableness determination was made. | The price reasonableness determination and testing for new items added to existing catalogs will follow the same techniques as the review of the initial catalog. However, the universe of items selected for 100% review (using stratification of high dollar items) or statistical sampling will consist of only the new items added since the initial catalog price reasonableness determination was made. | The contracting officer will perform a post award review of those items which are being ordered by EMALL customers in large dollar amounts (i.e., more than $25,000 in a fiscal year), and that were not selected for review during the pre-award sampling process. This procedure should be supplemented by performing a statistical analysis similar to that performed in the pre-award phase for other items not examined during the pre-award sampling process.

Re-solicitation and award of contract when it expires or reaches maximum ordering limit. | The price reasonableness determination for renewal catalogs will use the same process as for new catalogs. However, the contracting officer should also consider using the results of previous pre-award and post award reviews in the risk assessment used in selecting items for 100% (or stratified review). Additionally the contracting officer should consider using applicable Producer Price Index (PPI) changes from the old price timeframe to develop estimated fair and reasonable prices for items in the renewal catalog and compare this to the contractor’s proposed prices. | The contracting officer will perform a post award review of those items which are being ordered by EMALL customers in large dollar amounts (i.e., more than $25,000 in a fiscal year), and that were not selected for review during the pre-award sampling process. This procedure should be supplemented by performing a statistical analysis similar to that performed in the pre-award phase for other items not examined during the pre-award sampling process.

PGI SUBPART 15.4 – CONTRACT PRICING

PGI 15.402-90 Instructions for completing form “Reporting Requirements for Purchases from Exclusive Distributors/Dealers”.

(a) The form “Reporting Requirement for Purchases from Exclusive Distributors/Dealers” which has been loaded into DPACS for completion by the contracting officer will include the following information:

(1)Contractor name and DUNS number (Exclusive/Distributor/Dealer)

(2) Subcontractor name and DUNS number (e.g., OEM/actual manufacturer)

(3) Contract Number, Modification or Order Number if applicable;

(4) Date and amount of the contract action;

(5) Steps taken to attempt price analysis without requiring cost-type data;

(6) Contractor’s rationale for refusing to provide the data;

(7) Actions taken by the contracting activity to obtain the data;

(8) Data used to determine price reasonableness and the resulting determination; and,

(9) Actions planned to avoid this situation in the future.

(b) DLA contracting activities will report this information on a quarterly basis by January 30 for October 1 – December 31 actions; April 30 for January 1 – March 31 actions; July 30 for April 1 – June 30 actions; and October 30 for July 1 - September 30 actions. J-73 will ensure the completeness of the form and submit results through J-7 to DPAP by March 15 for October 1 – December 30 actions; June 15 for January 1 – March 31 actions; September 15 for April 1 – June 30 actions and December 15 for July 1 – September 30 actions.

PART 15

15.402-92 [CH20]Sole-Source Items Subject to Limited Competition

PGI 15.402-92 Acquisitions for Sole-Source Items Subject to Limited Competition. Contracting officers shall use the following guidelines in making the determination required by 15.402-92(a):

(a) Assessing “Extent of Competition.” In acquisitions for sole-source items that are subject to limited competition, a major factor that must be considered is whether the OEM exerts control over the competitors in the procurement, especially with regard to pricing, or whether the nature of the business relationship otherwise results in the OEM’s competitors’ pricing being directly dependent on the OEM’s pricing without significant independent pricing decisions by the competitors. For example, if the OEM exerts control over dealers or distributors by controlling the resale prices that dealers or distributors may charge, adequate price competition does not exist. If, however, the dealers and distributors have access to adequate supplies of the OEM’s product and may set their own prices (even if those prices, by virtue of economic exigencies, vary very little from one dealer or distributor to another), then adequate price competition may be found to exist for TINA purposes and for buys where TINA would not apply.

(1) OEM strategies. There are a variety of different alternatives employed by OEMs for selling/distributing products, including:

(i) selling directly to all customers;

(ii) selling through their own financially-affiliated network of dealers/distributors;

(iii) selling to multiple independent (not financially affiliated) dealers/distributors; and/or

(iv) entering into a sole dealer/distributor relationships (often found to lack transparency not conducive to independence and is often characterized by both parties refusing to make available the OEM’s cost data to substantiate atypical rapid growth in prices to the Government over time).

(2) OEM Control. The assessment should examine whether there is a financial (organizational) relationship under common ownership or control, or other business relationship not conducive to dealer/distributor independence and objectivity because the OEM exerts control over dealers or distributors. OEMs in situations involving competition with independent dealers/distributors may disclose cost details of their price.

(i) If the OEM does not provide a detailed breakdown of direct material, direct labor, overhead, along with General and Administrative costs (G&A) to dealers/distributors, this could be an indication of OEM control over the dealer(s)/distributor(s). In this type of situation the contracting officer may not have enough information to determine price reasonableness of the item being purchased.

(ii) Dealers/distributors should generally:

1. conduct appropriate cost or price analysis on the OEM (that may be acting as a subcontractor to the dealer/distributor) to establish the reasonableness of the proposed price (DFARS PGI 15.404-3); and

2. include the results of this analysis in its price proposal.

(iii) In instances when the OEM is unwilling to furnish data required for this analysis to the dealer/distributor, higher tier subcontractor/contractor, or directly to the Government; or if the dealer/distributor is unable or unwilling to perform the analysis, this could be considered an indication of control by the OEM and a sign that adequate price competition does not exist.

(iv) The unwillingness to provide, or unavailability of, a written contract/agreement documenting an OEM’s business relationship with a dealer/distributor may also provide further evidence indicating the absence of an arm’s-length business relationship, which in turn may be indicative of a lack of a competitive market for sole-source parts offered by the dealer(s)/distributor(s).

(b) Determining Price Reasonableness. In situations where sole-source items are subject to limited competition, consider the low offerer’s price in comparison to historical prices paid, along with the need for information on the offeror’s systems, which may be useful indicators of price realism and/or reasonableness.

(1) Historical Price Comparison. An explanation of the basis and frequency of the OEM’s price increases to dealers/distributors should be requested and considered when the contracting officer is basing a price reasonableness determination on a price comparison to previous prices. A pattern of frequent/substantial price increases since the inception of a dealer/distributor relationship may indicate the absence of an arm’s-length business relationship. For example, if a dealer/distributor increases prices by 20 percent annually, but the applicable producer price index (PPI) or cost indexes for material and labor increased at a significantly lower rate, this should be investigated. Where available, price increase information for both the dealer/distributor and OEM (that may be acting as a subcontractor) should be evaluated to determine the reasonableness of proposed price increases. If the OEM is proposing price increases significantly higher than the applicable independent measure(s) of cost/price growth by the dealer/distributor, and if the OEM refuses to provide appropriate documentation to support its proposed costs to the dealer/distributor, this could be viewed as an indication of OEM control over the dealer(s)/distributor(s) and indicate that adequate price competition may not exist.

(2) Contractor Purchasing System. For acquisitions involving sole-source items subject to limited competition that exceed the TINA threshold, the contracting officer should consider:

i. obtaining current Contractor Purchasing System Review (CPSR) status information from the Cost and Price office/analyst (see 15.404-1(a)(90)(5)), or direct from the cognizant Defense Contract Management Agency Administrative Contracting Officer of the most recent completed/pending/planned review; and

ii. If the contractor does not have an approved purchasing system, or if the system has not been reviewed, consider requesting that the ACO evaluate whether the OEM’s projected sales to Government during the next 12 months meet the FAR 44.302 criteria, to determine if a CPSR should be performed.

iii. If a CPSR should be performed, the contracting officer should request that the ACO perform this review so that the information is available to the contracting officer.

iv. Documentation related to the CPSR status, any request for a CPSR review or eligibility assessment, and the CPSR report shall be included in the contract file supporting the award, and a copy furnished the cognizant local pricing office that is responsible for providing support for the acquisition.

(3) Contractor Estimating System Review (CESR). For acquisitions of sole-source items subject to limited competition that exceed the TINA threshold and will result in an award to a large business, the contracting officer should consider obtaining current CESR status information of the proposed large business awardee from the Cost and Price office/analyst or direct from the cognizant Defense Contract Management Agency Administrative Contracting Officer (DFARS 215.407-5). This information shall be documented in the contract award file supporting the award.