15.404-3 Subcontract pricing considerations
Source: FAR 15.404-3 on acquisition.gov
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.
(a) The contracting officer is responsible for the determination of a fair and reasonable price for the prime contract, including subcontracting costs. The contracting officer should consider whether a contractor or subcontractor has an approved purchasing system, has performed cost or price analysis of proposed subcontractor prices, or has negotiated the subcontract prices before negotiation of the prime contract, in determining the reasonableness of the prime contract price. This does not relieve the contracting officer from the responsibility to analyze the contractor’s submission, including subcontractor’s certified cost or pricing data.
(b) The prime contractor or subcontractor shall-
(1) Conduct appropriate cost or price analyses to establish the reasonableness of proposed subcontract prices;
(2) Include the results of these analyses in the price proposal; and
(3) When required by paragraph (c) of this subsection, submit subcontractor certified cost or pricing data to the Government as part of its own certified cost or pricing data.
(c) Any contractor or subcontractor that is required to submit certified cost or pricing data also shall obtain and analyze certified cost or pricing data before awarding any subcontract, purchase order, or modification expected to exceed the certified cost or pricing data threshold, unless an exception in 15.403-1(b) applies to that action.
(1) The contractor shall submit, or cause to be submitted by the subcontractor(s), certified cost or pricing data to the Government for subcontracts that are the lower of either-
(i) $20 million or more; or
(ii) Both more than the pertinent certified cost or pricing data threshold and more than 10 percent of the prime contractor’s proposed price, unless the contracting officer believes such submission is unnecessary.
(2) The contracting officer should require the contractor or subcontractor to submit to the Government (or cause submission of) subcontractor certified cost or pricing data below the thresholds in paragraph (c)(1) of this subsection and data other than certified cost or pricing data that the contracting officer considers necessary for adequately pricing the prime contract.
(3) Subcontractor certified cost or pricing data shall be submitted in the format provided in 15.408 Solicitation provisions and contract clauses. of 15.408 or the alternate format specified in the solicitation.
(4) Subcontractor certified cost or pricing data shall be current, accurate, and complete as of the date of price agreement, or, if applicable, an earlier date agreed upon by the parties and specified on the contractor’s Certificate of Current Cost or Pricing Data. The contractor shall update subcontractor’s data, as appropriate, during source selection and negotiations.
(5) If there is more than one prospective subcontractor for any given work, the contractor need only submit to the Government certified cost or pricing data for the prospective subcontractor most likely to receive the award.