52.215-14
Integrity of Unit Prices
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.