15.407
Special cost or pricing areas
FAR 15.407 establishes rigorous requirements for cost data accuracy, system integrity, and transparency to ensure fair and efficient government contract pricing.
Overview
FAR 15.407 addresses special cost or pricing areas that require particular attention during the negotiation and administration of government contracts. This section outlines specific requirements and procedures for handling defective certified cost or pricing data, make-or-buy programs, forward pricing rate agreements, should-cost reviews, and estimating systems. The purpose is to ensure that cost and pricing practices are transparent, accurate, and in the government's best interest, while also providing mechanisms to identify and correct deficiencies or inefficiencies in contractor proposals and systems.
Key Rules
- Defective Certified Cost or Pricing Data
- Procedures for identifying, reporting, and remedying defective cost or pricing data submitted by contractors.
- Make-or-Buy Programs
- Requirements for contractors to submit and justify make-or-buy decisions to optimize cost efficiency and performance.
- Forward Pricing Rate Agreements
- Guidelines for establishing and using forward pricing rate agreements to streamline proposal evaluations.
- Should-Cost Review
- Provisions for conducting should-cost reviews to analyze contractor costs and identify potential savings.
- Estimating Systems
- Standards and evaluation criteria for contractor estimating systems to ensure reliable and consistent cost proposals.
Responsibilities
- Contracting Officers: Must evaluate and enforce compliance with these special cost and pricing requirements, initiate reviews, and address deficiencies.
- Contractors: Must provide accurate data, maintain compliant systems, and cooperate with reviews and audits.
- Agencies: Oversee implementation, conduct reviews, and ensure corrective actions are taken when necessary.
Practical Implications
- This section exists to protect the government from overpaying due to inaccurate or inefficient contractor cost practices.
- It impacts daily contracting by requiring rigorous data submission, system maintenance, and openness to government review.
- Common pitfalls include submitting defective data, failing to justify make-or-buy decisions, or maintaining inadequate estimating systems.