15.404-1
Proposal analysis techniques
FAR 15.404-1 requires contracting officers to use appropriate proposal analysis techniques to ensure all contract prices are fair and reasonable, with specific procedures for price, cost, and cost realism analyses.
Overview
FAR 15.404-1 outlines the techniques and procedures contracting officers must use to analyze proposals and ensure that contract prices are fair and reasonable. It details when to use price analysis, cost analysis, cost realism analysis, and technical analysis, and provides guidance on evaluating unit prices, unbalanced pricing, and pass-through contracts. The regulation emphasizes the importance of selecting appropriate analysis methods based on the complexity and circumstances of each acquisition, and mandates specific actions when certain thresholds or conditions are met.
Key Rules
- General Proposal Analysis
- Contracting officers must ensure prices are fair and reasonable using appropriate analytical techniques, and may seek expert assistance.
- Price Analysis
- Required when certified cost or pricing data are not needed; preferred techniques include comparing competitive proposals and historical prices.
- Cost Analysis
- Used when certified cost or pricing data are required, focusing on individual cost elements and profit to determine reasonableness.
- Cost Realism Analysis
- Mandatory for cost-reimbursement contracts to assess whether proposed costs are realistic and reflect a clear understanding of requirements.
- Technical Analysis
- Specialists should review technical aspects of proposals to validate the need and reasonableness of proposed resources.
- Unit Prices
- Unit prices must reflect intrinsic value and not be distorted by improper cost allocation; offerors must identify items not manufactured or significantly valued by them.
- Unbalanced Pricing
- Offers must be analyzed for unbalanced pricing, which can increase risk and may justify rejection of an offer.
- Pass-Through Contracts
- Special review and justification are required when more than 70% of work is subcontracted, with certain small business set-asides exempt.
Responsibilities
- Contracting Officers: Must select and apply appropriate analysis techniques, document decisions, seek technical or expert advice as needed, and ensure compliance with pass-through and unbalanced pricing requirements.
- Contractors: Must provide required pricing data, identify non-manufactured items, and ensure proposals are balanced and realistic.
- Agencies: Must oversee compliance, especially for pass-through contracts, and maintain documentation for analysis and determinations.
Practical Implications
- Ensures government pays fair and reasonable prices and mitigates risks of overpayment or performance issues.
- Requires careful documentation and justification of analysis methods and decisions.
- Common pitfalls include inadequate price/cost analysis, failure to detect unbalanced pricing, and insufficient documentation for pass-through justifications.