15.404
Proposal analysis
FAR 15.404 requires thorough analysis and documentation to ensure proposed prices, including subcontracts and profit, are fair and reasonable in negotiated procurements.
Overview
FAR 15.404 covers the requirements and procedures for analyzing proposals in negotiated procurements. It outlines the techniques contracting officers and evaluators must use to determine whether proposed prices are fair and reasonable, including cost and price analysis, the use of data to support analysis, considerations for subcontract pricing, and profit evaluation. The section ensures that government contracts are awarded at prices that reflect prudent business judgment and protect taxpayer interests.
Key Rules
- Proposal Analysis Techniques (15.404-1)
- Contracting officers must use appropriate techniques, such as price analysis, cost analysis, and technical analysis, to evaluate proposals and ensure fair and reasonable pricing.
- Data to Support Proposal Analysis (15.404-2)
- Contractors may be required to submit cost or pricing data, or other information, to support their proposals and facilitate analysis.
- Subcontract Pricing Considerations (15.404-3)
- The evaluation must include analysis of significant subcontracts to ensure their prices are also fair and reasonable.
- Profit (15.404-4)
- Contracting officers must consider profit as a separate element and use structured approaches to determine a reasonable profit or fee.
Responsibilities
- Contracting Officers: Must conduct thorough proposal analysis using prescribed techniques, request supporting data, analyze subcontract pricing, and determine reasonable profit.
- Contractors: Must provide accurate, complete, and current data to support their proposals and justify pricing, including for significant subcontracts.
- Agencies: Oversee compliance with proposal analysis requirements and ensure pricing integrity.
Practical Implications
- Ensures government pays fair and reasonable prices.
- Requires detailed documentation and justification for pricing decisions.
- Common pitfalls include inadequate analysis, insufficient data, or failure to scrutinize subcontractor pricing.