Analysis of Supplier Cost Proposals. Lectured by. Mr. Kenneth McGowan, DCMA Western Region. NCMA LA South Bay Chapter

Transcription

1 Analysis of Supplier Cost Proposals Lectured by Mr. Kenneth McGowan, DCMA Western Region NCMA LA South Bay Chapter January 15, 2015 Workshop Meeting I have been a cost and price analyst for the past 26 years. I currently work for DCMA HQ, in the Cost and Pricing Center. (Describe the organization of the DCMA Cost and Pricing Center) Before running headlong into supplier proposals, let s set some ground rules. Let s test your memory What are the 3 contracting methods? Simplified Acquisition (FAR Part 13).What is the Threshold? = $150,000 Sealed Bid (FAR Part 14) Negotiation (FAR Part 15) For this workshop we will discuss contracting by negotiation. 1. Requirements of FAR/DFAR Thresholds for Prime and Subcontractors (Suppliers) TINA, = $700,000 (FAR ) Certified Cost and Pricing Data [FAR , and (c) (1)] = Lower of $12.5M Or Both >$700,000, AND > 10% of Prime proposed price 2(c) DCAA Audit Minimums FP = $10M, Cost Type = $100M (PGI Note: This threshold determines whether or not DCAA will audit. Often these thresholds are interpreted to mean audits are required. NOT SO. DCMA can perform reviews and can supplement audits above these thresholds. Major Proposal = >$250M

2 Proposal Adequacy Checklist (DFARS ) Commercial Item Determination (DFARS ): prime contractor shall determine whether a particular subcontract item meets the definition of a commercial item (FAR 2.101). However, the Contracting Officer shall make the final determination of commerciality (FAR (c) (3) 2. Expectations of US Govt (DCMA) Prime Contractor conducts and submits a Cost and Price Analysis Report (CPAR) DCAA or DCMA will review the prime s CPAR. Reviews may include 2 nd and 3 rd tier suppliers depending on customer requests and supplier dollar value or risk. So, CPARs at all levels are expected. A Completed Proposal Adequacy Checklist Cost Realism on Cost-Reimbursement contracts Commercial Item Determination Certified Cost or Pricing Data (as appropriate) Other than Certified Cost or Pricing Data (as appropriate) 3. Gov t Assessment of Supplier Costs Beyond the Prime Contractor A. Integrated Cost Analysis Team (ICAT) Contractor discuss the development of the ICAT in DCMA a. Top 10 contractors with >$3.0 B, an on-site DACO, and significant pricing workload b. Currently located at b.i. b.ii. b.iii. b.iv. LM Ft Worth LM Denver Boeing St. Louis Sikorsky, Stratford

3 b.v. b.vi. b.vii. b.viii. b.ix. Raytheon, Tucson Northrop Grumman, Redondo Beach/El Segundo Raytheon Tewksbury Boeing, Philadelphia Bell Helicopter, Ft Worth c. Merge Engineering Technical with Pricing to minimize workload redundancy with a common goal to minimize costs. d. Objective: Understanding contractor price proposals better than the contractors to include FPRR/A, CAS, CERs, IR&D e. ICAT CMO reviews prime contractor proposal, Supporting DCMA CMOs review subcontractor proposals as appropriate. f. ICAT Director coordinates reviews with PCO, DCAA, and supporting DCMA CMOs g. If the workload is overwhelmed, ICAT Director may request support through the Director of Proposal Pricing (at DCMA HQ) from other DCMA offices and/or the DCMA Cost and Pricing Center. All major subcontracts are reviewed, all subcontracts over $700,000 are reviewed, and many subcontracts under $700,000 are reviewed based on risk. h. Emphasis is on h.i. h.ii. h.iii. h.iv. h.v. h.vi. Technical evaluation of hours required for the task Basis of estimate for the task to include the support to justify the BOE Is the math correct? Adequate support for commerciality Quality of the CPAR provided by the prime contractor Appropriate application of rates and CERs B. Non-ICAT Contractor a. DCMA CMO reviews prime contractor proposal, Supporting DCMA CMOs review subcontractor proposals as appropriate. b. A non-icat CMO receiving a request for field pricing support on a major proposal shall refer the request to the Director of Proposal Pricing for customer coordination. The Director of Proposal Pricing shall coordinate with the CMO Contracts Director and the Director of Technical Pricing to establish an evaluation approach and if necessary assemble a proposal surge-support team to augment the CMO staff. The cognizant CMO shall then perform the pricing evaluation with assistance from the Cost and Pricing Center.

4 c. All major subcontracts are reviewed, all subcontracts over $700,000 are reviewed, and many subcontracts under $700,000 are reviewed based on risk. d. Emphasis is on d.i. d.ii. d.iii. d.iv. d.v. d.vi. Technical evaluation of hours required for the task Basis of estimate for the task to include the support to justify the BOE Is the math correct? Adequate support for commerciality Quality of the CPAR provided by the prime contractor Appropriate application of rates and CERs 4. Analytic Techniques A. Proposals < $700,000 a. Certified Cost & Pricing Data is NOT required b. Price Analysis = Price Comparison b.i. b.ii. b.iii. b.iv. b.v. Review Proposed prices from solicitations Commercial prices from price lists, catalogues, published commodity market prices, similar indexes Review history of previously proposed price and Contract cost for the same item Review parametric estimates (rough yardsticks, e.g. cost/pound, cost/sq. foot) Review independent Government Estimates B. Proposals > &700,000 a. Certified Cost and Pricing Data IS required b. Cost Analysis = the sum of the direct and indirect costs allocable to the contract, incurred or to be incurred, less any allocable credits, plus any cost of money. c. Review all the cost elements c.i. c.ii. c.iii. Direct hours Direct labor Other direct costs

5 c.iv. c.v. c.vi. c.vii. Indirect cost (OH & G&A) Material Profit ( if asked) Cost of Money d. AND conduct a Price analysis e. Emphasis is on e.i. e.ii. e.iii. e.iv. e.v. e.vi. Technical evaluation of hours required for the task Basis of estimate for the task to include the support to justify the BOE Is the math correct? Adequate support for commerciality Quality of the CPAR provided by the prime contractor Appropriate application of rates and CERs C. Cost type contracts also require a review of cost realism a. Are the cost elements a.i. a.ii. a.iii. a.iv. Realistic for the work to be performed? Reflect clear understanding of the requirements? Consistent with the unique methods of performance? Consistent with the unique materials in the proposal? D. Overall, is the cost fair and reasonable? 5. Best Practices a. Create a review team that coordinates early and frequently with the customer, in our case the PCO. b. Form a review team that includes all DCMA CMOs, DCAA, Cost and Pricing Center, technical evaluators (whether from customer, Navy Price Fighters, or DCMA). c. DCMA and DCAA participation in RFP, proposal walk-thru, and fact-finding sessions. d. Ensure prime contractor submits subcontractor proposals and PCARS with or before the prime proposal is submitted as required by Table 15-2, FAR Ideally these submissions include documents and sources of information used in the PCAR or as part of the proposal (quotes, technical analysis, LTA, PCAR

6 supporting LTAs, historical pricing, commercial sales, etc. If it is not included DCMA will submit requests for information (RFIs). Best practice is to submit all the data up front. e. Clearly defined review responsibilities divided between DCMA, DCAA, program office, and technical evaluators minimizes duplication of effort and reduces RFIs to the contractors f. Detailed and well supported technical reviews of direct labor hours for the prime and major subcontractors. g. Develop cost models for prime and subcontractors.