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The Aerospace & Defense Forum San Fernando Valley Chapter February 19, 2019 COST & PRICE ANALYSIS IN SOURCE SELECTION THE TOTAL EVALUATED PRICE Presented by: Scott Koslow Vice President Valkyrie Enterprises Date: February 19, 2019

  1. The Aerospace & Defense Forum San Fernando Valley Chapter February 19, 2019 COST & PRICE ANALYSIS IN SOURCE SELECTION THE TOTAL EVALUATED PRICE Presented by: Scott Koslow Vice President Valkyrie Enterprises Date: February 19, 2019 1 01 02 03 04 05 Government •The total •Best value •Cost/price •GAO Protest pricing evaluated continuum evaluation objective price considerations 2 1

  2. The Aerospace & Defense Forum San Fernando Valley Chapter February 19, 2019  Obtain a “Fair & Reasonable” Price GOVERNMENT’S  Fair to whom? PRICING  What is standard for reasonableness?  CO must make determination for all contract OBJECTIVE (FAR awards 15.402)  Great discretion and judgement is granted to CO  Government’s Pricing Objective (FAR 15.402) 3 TOTAL  Represents the most likely total cost/price to the Government EVALUATED  Most probable total contract cost/price  Plus other Government costs, e.g. PRICE (TEP)  Transportation cost for FOB Origin  Ownership / life cycle costs  Plus adjustments to implement procurement preference programs 4 2

  3. The Aerospace & Defense Forum San Fernando Valley Chapter February 19, 2019  Sometimes easy to determine  A single firm fixed price line item  Determining TEP can be complex TEP (CONT.)  Cost plus incentive fee (CPIF) development  Fixed price incentive fee (FPIF) initial production quantities  Variable quantity and service options  Indefinite Delivery / Indefinite Quantity (ID/IQ) firm fixed price (FFP) spare parts 5 SOLICITATION  Describe how TEP is calculated REQUIREMENTS  Describe information to be submitted by offerors  Policy: No info from offeror if adequate price competition (FAR 15.402(a)(2)(i)) but…  How cost/price will be considered in award decision 6 3

  4. The Aerospace & Defense Forum San Fernando Valley Chapter February 19, 2019 Other Best value Tradeoff BEST VALUE continuum Methods CONTINUUM Price Low Price Performance Technically Tradeoff Acceptable (PPT) (LPTA) * US Government acquisition law requires that cost/price be evaluated in every source selection (FAR 15.304(c)(1)) 7 Non-Cost Evaluation Factors Cost or Price Evaluation Factor Past Per FAR 15.304(e): Non-cost Cost or Price Performance factors are: ฀Significantly more important than cost or price, Technical ฀Approximately equal to cost or price, or ฀Significantly less important than cost or price Small Business SOURCE SELECTION EVALUATION FACTORS 8 4

  5. The Aerospace & Defense Forum San Fernando Valley Chapter February 19, 2019 EVALUATION CONSIDERATIONS MAKING ADJUSTMENTS TO THE TEP 9  Typically the concern is that price may be too high (overstated)  More likely to occur when competition is inadequate  Only 1, or limited number, of capable sources REASONABLENESS  Unusual competitive advantage/market dominance  Vendor collusion or price fixing (illegal)  Adequate competition generally assures reasonableness 10 5

  6. The Aerospace & Defense Forum San Fernando Valley Chapter February 19, 2019 Comparison of proposed prices in response to solicitation* •Comparison with independent •Comparison with REASONABLENESS Government cost historical prices paid* estimate TYPICALLY ASSESSED BY PRICE ANALYSIS •Established market •Parametric cost prices estimates •Published price lists 11 Estimates are realistic for the work to be performed COST REALISM Reflect a clear Evaluating specific ANALYSIS (FAR understanding of elements of cost to government determine whether: requirements 15.404-1(D)) Consistent with offerors Shall be performed for technical proposal cost-type contracts (methods of performance/materials) 12 6

  7. The Aerospace & Defense Forum San Fernando Valley Chapter February 19, 2019  Typically the concern is that costs COST REALISM are too low (understated)  Government estimate of most ANALYSIS probable cost—what it will cost  TEP is adjusted by estimated (CONT.) additions or reductions to cost or fee 13  May, in unusual circumstances , be used for fixed price contracts COST REALISM  New requirements may not be fully understood ANALYSIS  Significant quality concerns  Previous quality or service shortfalls (CONT.)  Result only impacts performance risk assessment/responsibility determination 14 7

  8. The Aerospace & Defense Forum San Fernando Valley Chapter February 19, 2019 Option prices must be part of TEP Unpriced or unevaluated options not valid (FAR 17.206(a)) Justification for other than May not be exercised Appropriate cost/price Additional competition or full and open competition without analysis and OPTIONS 15 BEST  Flexible ordering contracts often use BEQ to calculate TEP ESTIMATED  Represents most likely quantity supplies and services to be ordered QUANTITY  Can also evaluate based on the maximum orderable quantities (BEQ) 16 8

  9. The Aerospace & Defense Forum San Fernando Valley Chapter February 19, 2019 •Variable quantity pricing (when BEQ TEP may not include used) all priced items •Alternative option line items Variability between •Determine whether any individual items prices can be are significantly over or understated assessed for overall •Price analysis methods are used balance BALANCED PRICING 17 Alternatively, despite an acceptable TEP, balance may still be an issue Offeror may be challenged to May be excluded from •Option prices significantly higher than support prices which appear competitive range basic unbalanced •“Front-loading” of costs •Gaming of potential scenario outcomes BALANCED PRICING (CONT.) 18 9

  10. The Aerospace & Defense Forum San Fernando Valley Chapter February 19, 2019 FOB origin transportation •Gov’t pays, evaluate cost differences costs •If specified in RFP, may add estimate of estimated support costs to the •Ownership TEP •System reliability and cost to repair costs •Fuel efficiency of alternative vehicle designs •Other variable ownership costs OTHER GOVERNMENT COSTS 19  Not considered in making award decision PAYMENT  Incorporate discounts into the contract (e.g., 10% - 20 days) TERMS  Does not adjust TEP for potential savings 20 10

  11. The Aerospace & Defense Forum San Fernando Valley Chapter February 19, 2019  Added to low offeror’s TEP if they are not a preferred source PROCUREMENT  Buy American Act (6 or 12%) (FAR PREFERENCE 25.105) PROGRAM  HUB Zone Small Business (10%) (FAR 19.1307) ADJUSTMENTS  Local sources for disaster and emergenc 21 Resolve Resolve any issues or concerns through discussions, if held Evaluate Evaluate offers at the TEP amount Award Award the successful offer at the proposed price MAKING THE AWARD DECISION 22 11

  12. The Aerospace & Defense Forum San Fernando Valley Chapter February 19, 2019 GAO PROTEST 23 Market research, Understand how you Do what the Section L understanding the are being evaluated States! customer. Section M! If you do not ask If you low ball the questions during the price and win, the proposal phase, award notice may be silence is consent. the best and worst day for your business! • Ask questions! AVOIDING PROTEST 24 12

  13. The Aerospace & Defense Forum San Fernando Valley Chapter February 19, 2019 Questions? 25 13

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