Subcontract pricing considerations
Contractors must rigorously analyze and document subcontractor pricing, and submit certified cost or pricing data for significant subcontracts to ensure fair and reasonable pricing in government contracts.
Overview
FAR 15.404-3 outlines the requirements for subcontract pricing considerations in government contracts. It establishes the responsibilities of contracting officers and contractors regarding the analysis and submission of subcontractor pricing data to ensure fair and reasonable pricing at all levels of the supply chain. The regulation details when certified cost or pricing data must be obtained, analyzed, and submitted, and sets specific thresholds and exceptions for these requirements. It also clarifies the need for current, accurate, and complete data, and provides guidance on the format and timing of submissions.
Key Rules
- Contracting Officer's Responsibility
- The contracting officer must determine the reasonableness of the prime contract price, including subcontract costs, regardless of the contractor’s purchasing system or prior analyses.
- Prime Contractor/Subcontractor Analysis
- Prime contractors and subcontractors must conduct cost or price analyses for proposed subcontracts and include the results in their proposals.
- Submission of Certified Cost or Pricing Data
- Contractors must obtain and analyze certified cost or pricing data for subcontracts exceeding the threshold, and submit this data to the Government when required.
- Thresholds for Submission
- Certified cost or pricing data must be submitted for subcontracts at or above $20 million, or those exceeding both the threshold and 10% of the prime contract price, unless waived by the contracting officer.
- Data Format and Currency
- Data must be submitted in the required format and be current, accurate, and complete as of the price agreement date.
Responsibilities
- Contracting Officers: Ensure fair and reasonable pricing, review contractor analyses, and determine when additional data is needed.
- Contractors: Conduct and document cost/price analyses, obtain and submit required certified cost or pricing data, and ensure data accuracy and timeliness.
- Agencies: Oversee compliance and may request additional data as necessary for price determination.
Practical Implications
This section ensures transparency and fairness in subcontract pricing, helping prevent overpricing and ensuring government funds are spent responsibly. Contractors must be diligent in analyzing and documenting subcontractor pricing, and failure to comply can result in delays, disallowed costs, or contract disputes. Understanding thresholds and data requirements is critical to avoid compliance pitfalls.