RGCI-Adequate Price Competition –  A Change is ComingThe Federal Acquisition Regulation (FAR) implemented Section 822 of the Fiscal Year 2017 National Defense Authorization Act (NDAA) which requires contactors to submit additional certified cost or pricing data when only one offer is received in response to a competitive solicitation.  Certified cost and pricing data is required when the following three criteria are met:

  1. Awarding any negotiated contract.
  2. Awarding a subcontract at any tier if the contractor and each higher-tier subcontractor were required to submit certified cost or pricing data.
  3. Modifying a contract.

Currently the requirement for certified cost or pricing data threshold is $2 million, but the Government may not require certified cost or pricing when an exception to the requirement is met.  The first and one of the most common exceptions is “adequate price competition”.   FAR amended its definition of “adequate price competition” for DOD, NASA and the Coast Guard in its July 12, 2019 issuance.  FAR Part 15.403-1(c) was revised for these three agencies that in order to have “adequate price competition”, the Government/Contractors must receive two or more responsive offers. If only one offer is received, there is no adequate competition even if the contractor believed it would have competition and the offer is otherwise fair and reasonable. 

The “old rule” (summarized below) allowed the use of the following to justify “adequate price competition”:

  1. Actual Competition: Two or more offerors submitted offers that satisfy the Government’s requirements in a best-value competition;
  2. Expected Competition: Only one offer was submitted, but that offer was submitted with the expectation that at least one other offeror was capable of submitting a meaningful offer; or
  3. Comparison with Other Competitions: Price analysis clearly demonstrates that the offered price was reasonable based on a comparison with similar contracts that resulted form adequate price competition.

What Does this Mean to Your Organization?   

If you have contracts issue by DOD, NASA and the Coast Guard, the Government can no longer utilize “no bids” in support of “adequate price competition” when evaluating a contract proposal.  Therefore, if the Government is not obtaining additional bidders a company may be required to submit certified cost and pricing data more frequently.  As a Contractor obtaining proposals from subcontractors, you can no longer use “no bids” or comparison with other competitions as “adequate price competition” in support of the procurement.  Therefore, this may require your company to obtain certified cost and pricing data more frequently from subcontractors. 

If agencies need further data to support an adequate price analysis, they may request additional cost and pricing data.  Contractors may also find agencies directing them to provide certified cost or pricing data in competitive procurements even for proposals below the threshold for submission of certified cost or pricing data.  Contractors will be expected to apply these standards to their supply chains through Contractor Purchasing System Review (CPSR).   We expect DCMA to change their CPSR Guidebook to that of the new requirements in FAR  15.403-1(c); therefore, contractors that continually only receive one proposal or quote in response to a competitive procurement should “beef” up their price analysis and support for a “fair and reasonable price” and in some cases obtained certified cost and pricing data.

Bottom line - the Government continues to push for competition to ensure fair and reasonable pricing is being obtained and documented.   Contractors can expect that DCMA will be less likely to accept “no bids” even below the certified cost and pricing threshold and will question price analysis.  Make sure buyers are provided adequate lead time in your organizations to enable adequate competition and price analysis.

If you need help determining if your price analysis is adequate, we can help.  Redstone GCI has a team that specializes in Purchasing Systems criteria as well as Adequate Cost or Pricing Data. 

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Written by Cyndi Dunn

Cyndi Dunn Cyndi currently serves her clients by providing full accounting support, contract management, DCAA compliance and audit issues. She has over 20 years of experience in the government contracting industry and public accounting/consulting. She has been responsible for the accounting, financial reporting, budgeting and forecasting of a $600 million dollar division of a major prime contractor. She has negotiated indirect rates and audit issues with DCAA and worked extensively with outside auditors for both annual financial statement and Sarbanes-Oxley audits. Prior to joining Redstone Government Consulting, Inc., Cyndi has been a Division Vice President/Controller for large Government contractors where she was responsible for managing the accounting (G/L, A/R, A/P, payroll and financial reporting), contracts, human resources and compliance functions (DCAA and Sarbanes-Oxley). Cyndi also spent four years as the manager of Internal Audit for a large government contractor and six years as an auditor in public accounting. Her areas of expertise include financial accounting, internal controls, cost accounting and indirect rates, government compliance (DCAA, FAR and CAS) and internal audit. Education Cyndi graduated from Virginia Commonwealth University with a Bachelor of Science in Accounting.

About Redstone GCI

Redstone Government Consultants are a team of the most senior industry veterans and the brightest new talent in the industry. Many have held senior government positions including leadership roles in the DCAA. Our new talents bring significant accounting and software experience along with fresh perspectives, inspiration and energy to our team. Through our leadership and combined experience, we provide a unique perspective, bringing both government and contractor proficiencies to bear and ensuring rock-solid government compliance for our clients.

Topics: DFARS Business Systems, Government Regulations