52.215-14 Integrity of Unit Prices
Source: FAR 52.215-14 on acquisition.gov
FAR 52.215-14 requires contractors to allocate costs to contract line items based on actual base costs, preventing artificial inflation or deflation of unit prices in government supply contracts.
Overview
FAR 52.215-14, Integrity of Unit Prices, is designed to prevent the distortion of unit prices in government contracts for supplies. It requires that costs be allocated to contract line items in a manner that reflects the actual base cost of each item, such as manufacturing or acquisition costs. The regulation prohibits cost distribution methods that artificially inflate or deflate unit prices, such as allocating costs equally across items with varying base costs. Contractors must also identify supplies they do not manufacture or to which they do not add significant value when requested by the Contracting Officer. The clause must be flowed down to most subcontracts, with specific exceptions for certain acquisition types and thresholds.
Key Rules
- Proportional Cost Distribution
- Costs must be distributed among contract line items in proportion to their actual base costs; artificial cost allocation is not allowed.
- Identification of Non-Manufactured/Low-Value Items
- Upon request, contractors must identify supplies they do not manufacture or to which they do not contribute significant value.
- Flowdown Requirement
- The clause (excluding paragraph (b)) must be included in most subcontracts, except for those at or below the simplified acquisition threshold, construction, utility services, certain services, commercial products/services, and petroleum products.
Responsibilities
- Contracting Officers: Ensure the clause is included in applicable solicitations and contracts; may request identification of non-manufactured/low-value items.
- Contractors: Allocate costs properly, identify applicable supplies when requested, and flow down the clause to qualifying subcontracts.
- Agencies: Oversee compliance and ensure proper contract administration.
Practical Implications
- This clause exists to prevent price manipulation and ensure transparency in government pricing.
- It impacts how contractors structure their proposals and allocate costs, requiring careful documentation and justification.
- Common pitfalls include improper cost allocation and failure to flow down the clause to required subcontracts.
As prescribed in 15.408(f)(1), insert the following clause:
Integrity of Unit Prices (Nov 2021)
(a) Any proposal submitted for the negotiation of prices for items of supplies shall distribute costs within contracts on a basis that ensures that unit prices are in proportion to the items’ base cost (e.g., manufacturing or acquisition costs). Any method of distributing costs to line items that distorts unit prices shall not be used. For example, distributing costs equally among line items is not acceptable except when there is little or no variation in base cost. Nothing in this paragraph requires submission of certified cost or pricing data not otherwise required by law or regulation.
(b) When requested by the Contracting Officer, the Offeror/Contractor shall also identify those supplies that it will not manufacture or to which it will not contribute significant value.
(c) The Contractor shall insert the substance of this clause, less paragraph (b) of this clause, in all subcontracts for other than: acquisitions at or below the simplified acquisition threshold, as defined in Federal Acquisition Regulation (FAR) 2.101 on the date of subcontract award; construction or architect-engineer services under FAR part 36; utility services under FAR part 41; services where supplies are not required; commercial products and commercial services; and petroleum products.
(End of clause)
Alternate I (Oct 1997). As prescribed in 15.408 (f)(2), substitute the following paragraph (b) for paragraph (b) of the basic clause:
(b) The Offeror/Contractor shall also identify those supplies that it will not manufacture or to which it will not contribute significant value.